fin mango chapter 8 LS

The NYSE member who acts as a dealer in a small number of securities is called _____.

specialists (designated marker maker)

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

expected

One common reason for having two classes of common stock with different voting rights is:

it is easier for insiders such as founding families to maintain control of the company

The goal of many successful organizations is a ______ rate of growth in dividends.

steady

Preferred stock has preference over common stock in the:

1) distribution of corporate assets 2) payment of dividends

An asset's value is determined by the present value of its ______ cash flow.

future

The value of a firm is the function of its ______ rate and its ______ rate.

growth; discount

Most voting in large corporations is done by proxy because:

most small shareholders do not attend the annual meeting

Fundamentally, the business of the NYSE is to attract and process _________.

order flow

Which of the following entities declares a dividend?

the board of directors

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

the current price

The two most important stock markets in the U.S. are the New York Stock Exchange and ______.

NASDAQ

One reason corporations use staggered boards is that:

it makes takeover attempts less likely to be successful

When the stock being valued does not pay dividends,

the dividend growth model can still be used

The trading of existing shares occurs in the _____ market.

secondary

Stock price reporting has increasingly moved from traditional print media to the _______ in recent years.

internet

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

broker

A zero growth model for stock valuation is distinguished by a ______.

constant dividend amount

The ____ can be interpreted as the capital gains yield.

constant growth rate

When valuing a stock, the advantage to considering the stock price in the distant future (rather than a more near term price) as a cash flow is that:

when discounted to present value, a stock price in the distant future is nearly zero

If the growth rate is zero, then the capital gains yield is ____.

zero

Which of the following are reasons why it is more difficult to value common stock than it is to value bonds?

1) common stock cash flows are not known in advance 2) the life is essentially forever 3) the rate of return required by the market is not easily observed

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

1) dividend yield 2) growth rate

A benchmark PE ratio can be determined by using:

1) a company's own historical PEs 2) the PEs of similar companies

Which of the following are expected cash flows to investors in stocks?

1) capital gains 2) dividends

In which ways is preferred stock like a bond?

1) has credit ratings 2) shareholders receive a stated value if the firm liquidates 3) sometimes has a sinking fund 4) shareholders receive a stated dividend

Which of the following are features of common stock?

1) it has no special preference in receiving dividends 2) it has no special preference in bankruptcy 3) it generally has voting rights

NASDAQ has which of these features?

1) multiple market maker system 2) computer network of securities dealers

Three special case patterns of dividend growth include:

1) non constant growth 2) constant growth 3) zero growth

Which of the following is usually a right of common shareholders?

1) voting rights 2) the right to a proportional share of dividends paid

Is a company required to pay preferred dividends?

No; the company may defer dividends on preferred stock; however they cannot pay dividends to common shareholders until preferred dividends are paid.

All else constant, the dividend yield will increase if the stock price ______.

decreases

When voting for the board of directors, the number of votes a shareholder is entitled to is generally determined as follows:

one vote per share held

The NYSE differs from NASDAQ primarily because the NYSE has:

1) specialists 2) an auction market 3) a physical location

Which of the following is true about dividend growth patterns?

dividends may grow at a constant rate

Which of the following occurs in the primary market?

newly issued stocks are initially sold

A PE ratio that is based on estimated future earnings is known as a _______ PE ratio.

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