FNAN 300 Chapter 7 Connect Learnsmart
What is the total return for a stock that currently sells for $50, just paid a $1.75 dividend, and has a constant growth rate of 8%?
11.78%
If a zero-dividend stock is purchased for $80 and sold one year later for $84, the 1-year return is ______________ percent.
5
What information do we need to determine the value of a stock using the zero growth model?
dividend and discount rate
D0
dividend just paid
Which one of the following is true about dividend growth patterns?
dividends may grow at a constant rate
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; discount
"Inside Quotes represent the _______________ and the _______________
highest bid price; lowest ask price
If the growth rate (g) is zero, the capital gains yield is ______________.
zero
A zero-growth stock pays a dividend of $2 per share and has a discount rate of 10%. What will the stock's price be?
$20.00
What is the price of a stock at the end of the year (P1) if the dividend for the year 2 (D2) is $5, the price for year 2 (P2) is $20, and the discount rate is 10%?
$22.73
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 = 6/(0.11-0.03)
Websites that allow investors to trade directly with one another are termed _____________.
ECNs
The NYSE differs from the NASDAQ primarily because the NYSE has:
a physical location and a face-to-face auction market
A person who brings buyers and sellers together is called a(n) ________________.
broker
NASDAQ has which of these features?
computer network of securities dealers and multiple market marker system
Stock price reporting has increasingly moved from traditional print media to the ______________ in recent years.
internet
D1
next expected dividend
This type of growth describes a company that grows quickly at first, then slower in future years.
non-constant
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 fundamental business of the New York Stock Exchange is to attract ______________.
order flow
Preferred stock has preference over common stock in the:
payment of dividends and distribution of corporate assets
P1
price in one year
P0
price today
Shares of stock are first brought to the market and sold to investors in the ___________ market.
primary
New York Stock Exchange Designated Market Makers (DMMs) were formerly called _______________.
specialists
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
R
discount rate
Which of the following are cash flows to investors in stocks?
dividends and capital gains
In the dividend discount model, the expected return for investors comes from which two sources?
growth rate and dividend yield
Using a benchmark PE ratio against current earnings yields a forecasted price called a _____________ price.
target
A benchmark PE ratio can be determined using:
the PEs of similar companies and a company's own historical PEs
The dividend yield is determined by dividing the expected dividend (D1) by:
the current price (P0)
Which of the following defines the primary market?
the primary market is where stocks are issued for the first time
