FINC 3210 CH 7

The trading of existing shares occurs in the ___ market

secondary

New York Stock Exchange Designated Market Makers (DMMs) were formerly called_______

specialists

A benchmark PE ratio can be determined using:

A company's own historical PEs and the PEs of similar companies

the NYSE differs from the NASDAQ primarily because the NYSE has

A face-to-face auction market and a physical location

Which of the following ratios might be used to estimate the value of a stock?

The Price/Earnings ratio and The Price/Sales ratio

What is the total return for a stock that currently sells for 100 is expected to pay a dividend in one year of 2 and has a constant growth rate of 8%

10%

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

forward

The value of a firm is a function of its ______ rate and its _____ rate

growth and discount

"Inside Quotes" represent the ____ and the _____

highest bid price and the lowest asked price

What information do we need to determine the value of a stock using the zero growth model?

Dividend and discount rate

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

Dividend yield and growth rate

Which of the following represents the valuation of stock using a zero growth model

Dividend/Discount rate = D/r

Which of the following are reasons that make valuing share of stock more difficult than valuing bond

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

Which of the following is true about dividend growth patterns?

Dividends may grow at a constant rate

Websites that allow investors to trade directly with one another are termed____.

ENCs

The two must important stock markets in the US are the New York Stock Exchange and

NASDAQ

Examples of secondary markets in the US include which of the following

Nyse Cse NASDAQ

The fundamental business of the New York Stock Exchange is to attract_____.

Order flow

If the growth rate (g) is zero, the capital gains yield is ___.

Zero

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

broker

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

cummlative

If unpaid preferred dividends must be "caught up" before any common dividends can be paid, they are called _____ dividends

cumulative

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

internet

Nasdaq has which of these features

multiple market marker system and computer network of securities dealers

This type of growth describes a company that grows quickly at first, then slower in future years

non-constant

Which of the following are rights of common stock holders

the right to share proportionally in any common stock and the right to share proportionally in any residual value in the event of liquidation and the right to vote on matters of importance

What is the value of a stock if next year's dividend is $6, the discount rate is 11 percent and the constant rate of growth is 3 percent

75

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

decreases

preferred stock has preference over common stock in the:

distribution of corporate assets and payment of dividends

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

dividends and capital gains

The constant-growth model assumes that ____.

dividends change at a constant rate

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

one vote per share held

Initial public offerings occur in the ____ market

primary

Which of the following are reasons that make valuing a share of stock more difficult than valuing a bond

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

Using a benchmark PE ratio against earnings yields a forecast price called a _____ price.

target

Three special case patterns of divided growth discussed in the text include:

zero growth, constant growth, and non-constant growth