Chapter 8 Finance

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The secondary market is best defined by which one of the following?

market where outstanding shares of stock are resold

An increase in which of the following will increase the current value of a stock according to the dividend growth model? 1.) Dividend Amount 2.) The number of Future Dividends provided the current number is less than infinite 3.) discount rate 4.) dividend growth rate

1.) Dividend Amount 2.) The number of Future Dividends provided the current number is less than infinite 4.) dividend

Which one of the following statements is correct? A. The capital gains yield is the annual rate of change in a stock's price. B. Preferred stocks have constant growth dividends. C. A constant dividend stock cannot be valued using the dividend growth model. D. The dividend growth model can be used to compute the current value of any stock. E. An increase in the required return will decrease the capital gains yield.

A.) The capital gains yield is the annual rate of change in a stock's price.

Which one of following is the rate at which a stock's price is expected to appreciate?

Capital Gains Yield

What is the model called that determines the present value of a stock based on its next annual dividend, the dividend growth rate, and the applicable discount rate?

Dividend Growth

The dividend growth model: I. assumes that dividends increase at a constant rate forever. II. can be used to compute a stock price at any point in time. III. can be used to value zero-growth stocks. IV. requires the growth rate to be less than the required return.

I, II, III, and IV

Who owns the NYSE?

Shareholders

You cannot attend the shareholder's meeting for Alpha United so you authorize another shareholder to vote on your behalf. What is the granting of this authority called?

Voting by proxy

Which one of the following transactions occurs in the primary market?

a purchase of newly issued stock from AT&T

An agent who arranges a transaction between a buyer and a seller of equity securities is called a:

broker


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