CFP - Investment Planning: Stocks
$435,000 (10,000/1,700,000=59%; 0.59*850,000=5,000; 5,000*$87=$435,000)
Haley Mills has been a client of yours for quite some time. She recently unearthed some share certificates that her grandmother had left to her a few years ago. These shares that Grandma Mills bought were from an Internet start up. The timing was perfect, because the firm was about to undertake another stock offering and Haley had preemptive rights. Of the firm's initial 1,700,000 share offering, Grandma Mills had invested enough to buy 10,000 shares at $11 per share. The new offering was an 850,000 share offering at $87 per share. If Haley fully exercised her preemptive rights, how much total cash would she pay for the shares in this new offering?
B. Two days. (ex-div date is 1 day before the date of record and investor must purchase stock 1 day before ex-div date to receive the div)
How many days prior to the date of record must an investor purchase a stock to receive a dividend? A. One day. B. Two days. C. Three days. D. Four days.
D. Decrease in order to compensate the investor for increased risk.
If the market risk premium were to increase, the value of common stock (everything else being equal) would: A. NOT change because this does NOT affect stock values. B. Increase in order to compensate the investor for increased risk. C. Increase due to higher risk-free rates. D. Decrease in order to compensate the investor for increased risk.
B. Stock prices will decrease because the required rate of return for investors will increase.
The Federal Reserve Board is expected to sell large quantities of Treasury securities in the near future. What impact will these sales likely have on stock prices? A. Stock prices will decrease because the dividend growth rate of stocks will increase. B. Stock prices will decrease because the required rate of return for investors will increase. C. Stock prices will increase because interest rates will decrease as investors compete to purchase the Treasury securities. D. Stock prices will increase because the growth rate in dividends and earnings will increase.
B. Ex-dividend date.
The date on which the current dividend no longer accompanies the stock is: A. Holder of record date. B. Ex-dividend date. C. Trade-free date. D. Declaration date.
D. The fourth market.
The market where exchange and broker dealer services are eliminated entirely is: A. The primary market. B. The secondary market. C. The third market. D. The fourth market.
B. Before the ex-dividend date.
To be on a corporation's books as a holder-of-record (and thus have a right to the next dividend payment), the investor must purchase stock: A. Before the declaration date. B. Before the ex-dividend date. C. Between the ex-dividend date and the record date. D. Three days before the payment date.
II and III only.
Which of the following are characteristics of the payout ratio? I. The percentage of compensation paid to the top 10 executives of a company as a percentage of net income. II. The percentage of net income paid out as dividends. III. A measure of a company's earnings retention philosophy. IV. A measure of a company's attitude toward compensation of top executives on the basis of performance.
D. Treasury shares. (no such thing as "repurchased shares")
Which of the following have been repurchased by the corporation? A. Unissued shares. B. Repurchased shares. C. Authorized shares. D. Treasury shares.
D. It is a broader base measure of the stock market than the Wilshire 5000 Index.
Which of the following statements concerning the S&P 500 is incorrect? A. It has less dramatic fluctuations than the Dow Jones Industrial Average. B. It is a reflection of broad sectors of the market. C. It is a value-weighted index. D. It is a broader base measure of the stock market than the Wilshire 5000 Index.
