FIN ch7

what information do we need to know to determine the value of a stock using the zero growth method...

-Dividend -Discount Rate

websites that allow for investors to trade directly are termed

ECN's

a person who brings together buyers and sellers together is called a...

broker

if unpaid preferred dividends must be caught up before any common dividends can be paid, they are called...

cumulative dividends

with all else held constant, the dividend yield will increase if the price of stock...

decreases

what are two cash flows to investor stocks?

dividends capital gains

the price of a share of common stock is equal to the present value of all ______ future dividends

expected

year one through 3, the company grows at 5%. year 4, growth plateaus to 5%. What kind of growth is this?

non-constant

the fundamental business of the NYSE is to attract..

order flow

shares of stock are first brought to the market and sold to investors in the ________ market

primary

in the ___________ market, existing shares are bought and sold amongst investors

secondary

using the PE ratio against current earnings yields a forecasted price called the....

target price

the PE ratio based on estimated future earnings is called the ____________ PE ratio

forward

New York Stock Exchange Designated Market Makers (DMMs) were originally called.

specialists

which of the following make valuing the share of stock more difficult than that of a bond

-dividends are unknown and uncertain -stock has no set maturity -the required rate of return is unobservable

In the dividend discount model, the expected return for investors comes from which two sources?

-growth rate -Dividend yield

preferred stock has preference over common stock because..

-payment of dividends -distribution of corporate assets

which ratios might be used to calculate the value of a stock

-price earnings/ratio -price sales/ratio

the benchmark of PE ratio can be determined using..

-the PEs of similar companies -a companies own historical PE's

which of the following are rights of common stock holders?

-the right to share proportionally of any common dividends paid -the right to vote on matters of importance -the right to share proportionatly in any residual value in the event of liquidation

what special cases of dividend growth are discussed in the txt

-zero growth rate -constant growth rate -non constant growth rate

in a zero growth rate method, the capital gain is..

0

what features does the NASDAQ have?

-computer network of securities dealers -multiple market maker system

The NYSE differs from the NASDQ because the NYSE is...

-face to face -has a physical location

If Joan owns 100 shares of ABC and the company elects 4 directors, under cumulative voting, Joan would usually have..

400 votes

the dividend yield is determined by dividing the expected dividend by the

CURRENT PRICE (p0)

TRUE OR FALSE For investors in the stock market, dividends from stocks are fixed and guaranteed while capital gains are variable and not guaranteed.

FALSE