finance test 3

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

Dividends Capital gains

t/f For investors in the stock market, dividends from stocks are fixed and guaranteed, while capital gains are variable and not guaranteed.

False

A benchmark PE ratio can be determined using:

a company's own historical PEs the PEs of similar companies

__________ is a payment by a corporation to shareholders, made in either cash or stock

dividend

Common stock as no special preference either in receiving __________ or in bankruptcy.

dividends

The assumption of constant growth infers that _________.

dividends change at a constant rate

When the stock being valued does not pay dividends,

the dividend growth model can still be used.

Which of the following entities declares a dividend?

The board of directors

Preferred stock has preference over common stock in the _____.

-distribution of corporate assets -payment of dividends

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

Investment firms that are active participants in stocks assigned to them are called _______ liquidity providers.

supplemental

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

-The life of a common stock is essentially forever. -Common stock cash flows are not known in advance -The rate of return required by the market is not easily observed.

A share of common stock is ________ (less/more) difficult to value in practice than a bond.

more

A stock with dividend priority over common stock is called a _________ stock

preferred

The trading of existing shares occurs in the ______ market.

secondary

Which of the following are features of common stock?

-It has no special preference in bankruptcy. -It has no special preference in receiving dividends. -It generally has voting rights.