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
