Finance 300 Practice Questions Chapter 8

A person on the floor of the NYSE who executes buy and sell orders on behalf of customers is called a(n): A. Floor trader. B. Dealer. C. Specialist. D. Executor. E. Commission broker.

E

An agent who maintains an inventory from which he or she buys and sells securities is called a: A. Broker. B. Trader. C. Capitalist. D. Principal. E. Dealer.

E

Emst & Frank stock is listed on NASDAQ. The firm is planning to issue some new equity shares for sale to the general public. This sale will definitely occur in which one of the following markets? A. Private. B. Auction. C. Tertiary. D. Secondary. E. Primary.

E

A firm has a current EPS of $2.54 and a benchmark PE of 16.4. Earnings are expected to grow 3.8 percent annually. What is the target stock price in one year? A. $43.24 B. $42.89 C. $46.08 D. $41.66 E. $48.09

A

An agent who arranges a transaction between a buyer and a seller of equity securities is called a: A. Broker. B. Floor trader. C. Capitalist. D. Principal. E. Dealer.

A

The current dividend yield on CJ's common stock is 1.89 percent. The company just paid a $1.23 annual dividend and announced plans to pay $1.27 next year. The dividend growth rate is expected to remain constant at the current level. What is the required rate of return on this stock? A. 5.14 percent B. 5.82 percent C. 6.08 percent D. 6.39 percent E. 6.75 percent

A

A floor broker on the NYSE does which one of the following? A. Supervises the commission brokers of a specific financial firm. B. Trades for his or her personal inventory. C. Executes orders on behalf of a commission broker. D. Maintains an inventory and assumes the role of a market maker. E. Is charged with maintaining a liquid, orderly market.

C

A market maker who acts as a dealer in one or more securities on the floor of the NYSE is called a: A. Floor trader. B. Floor post. C. designated market maker. D. Floor broker. E. Commission broker.

C

A securities market primarily composed of dealers who buy and sell for their own inventories is referred to which type of market? A. Auction. B. Private. C. Over-the-counter. D. Regional. E. Insider.

C

Antiques R Us is a mature manufacturing firm. The company just paid an $11 dividend, but management expects to reduce the payout by 9 percent per year indefinitely. Required : If you require an 15 percent return on this stock, what will you pay for a share today? A. $166.83 B. $42.13 C. $41.71 D. $41.29 E. $45.83

D

Currently, a firm has an EPS of $2.54 and a benchmark PE of 16.4. Earnings are expected to grow 3.8 percent annually. What is the estimated current stock price? A. $43.24 B. $42.89 C. $46.08 D. $41.66 E. $48.09

D

The secondary market is best defined by which one of the following? A. Market in which subordinated shares are issued and resold. B. Market conducted solely by brokers. C. Market dominated by dealers. D. Market where outstanding shares of stock are resold. E. Market where warrants are offered and sold.

D

Which one of the following represents the capital gains yield as used in the dividend growth model? A. D1 B. D1 / P0 C. P0 D. g E. g / P0

D

Which one of the following rights is never directly granted to all shareholders of a publicly held corporation? A. Electing the board of directors. B. Receiving a distribution of company profits. C. Voting either for or against a proposed merger or acquisition. D. Determining the amount of the dividend to be paid per share. E. Having first chance to purchase any new equity shares that may be offered.

D

Marcel Co. is growing quickly. Dividends are expected to grow at a 20 percent rate for the next 3 years, with the growth rate falling off to a constant 6 percent thereafter. Required: If the required return is 10 percent and the company just paid a $1.40 dividend. what is the current share price? A. $51.36 B. $52.11 C. $48.80 D. $53.18 E. $54.24

E

Sew 'N More just paid an annual dividend of $1.42 a share. The firm plans to pay annual dividends of $1.45, $1.50, and $1.53 over the next 3 years, respectively. After that time, the dividends will be held constant at $1.60 per share. What is this stock worth today at a discount rate of 9 percent? A. $17.08 B. $16.30 C. $16.67 D. $16.79 E. $17.50

E

Which one of the following is a type of equity security that has a fixed dividend and a priority status over other equity securities? A. Senior bond. B. Debenture. C. Warrant. D. Common stock. E. Preferred stock.

E

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? A. Alternative voting. B. Cumulative voting. C. Straight voting. D. Indenture voting. E. Voting by proxy.

E