FNCE 3700-Quiz 2
Which one of the following transactions occurs in the primary market?
The U.S Treasury sell $30,000,000 face value of 5-year Notes during one of it's weekly auctions.
You recently heard a news announcer state that the market is approaching its resistance level. Which one of the following is the best interpretation of that statement?
The market is approaching the highest level that is reasonably expected.
You want to sell shares of stock at the current price. Which type of order should you place?
market
In an efficient market, stocks with similar risks will:
have similar rates of return.
A stock sells for $16.22 a share and has a required return of 15 percent. Dividends are paid annually and increase at a constant 3 percent per year. What is the amount of the last dividend paid?
$1.89 Using what's given, 16.22=D0*1.03/(0.15-0.03).br Solving for D0 yields 16.22*0.12/1.03=1.8897 or 1.89
Cee The Moon is offering 800 shares in a Dutch auction IPO. The following bids have been received: What will the gross proceeds be for this offering?
$12,800
Historically, Jones Trucking has had a P/E ratio of 16.2. The firm has current net income of $62,000 with 80,000 shares of stock outstanding. The EPS growth rate is 4.7 percent. What is the expected price of this stock one year from now?
$13.15 Start with EPS now = 62/80 = 0.775 ; ---> Next year they will be 0.775*1.047 = 0.811425 ; assuming the PE remains constant, price next year will be 0.811425*16.2 = 13.15 (with rounding)
The Shoe Box will not pay a dividend next year. The following two years, it will pay annual dividends of $1 per share. Starting in year 4, the dividends will increase by 4 percent annually. The discount rate is 8 percent. What is the value of this stock today?
$22.29 D1=0; D2=1; D3=1; D4=1*1.04=1.04br Terminal value = 1.04/(0.08-0.04) = 26br Value per share = 0/1.08+1/1.08^2+(1+26)/1.08^3br =22.29
An order book displays the following information: 5-102.gif You place a market order to buy 100 shares. At what price will your order be executed?
$28.17
Barn Wood Interiors announced today that it is going out of business. As of today, no more regular dividends will be paid. The firm will, however, pay two liquidating dividends. The first will be paid one year from now in the amount of $16 a share. The second and final payment will be paid two years from now at an estimated $36 a share. What is the value of this stock today at a discount rate of 18.7 percent?
$39.03 Value = 16/1.187 + 36/1.187^2 = 39.03
Which one of the following is used as an indicator that a firm has good-quality earnings?
False
The duties of a specialist or designated market maker include which of the following? I. maintain an orderly market II. offer a higher bid price than the floor brokers III. provide liquidity to the market IV. purchase all shares offered as limit sells
I and III only
Market timing tends to lead to:
underperforming the overall market.
When stocks are held in an index in proportion to their total company market value, the index is:
value-weighted.
You analyze a firm's financial statements and invest based upon the results of this analysis. Which form of market efficiency must exist if you are able to earn excess profits on these investments?
weak-form