Unit 12 Quizzes

Discounted cash flow is commonly thought of as applying solely to fixed-income securities. However, forms of DCF used for the valuation of common stock also include i the price-to-earnings ratio ii the dividend discount model iii the discounted book value model iv the dividend growth model

ii and iv

A customer owns cumulative preferred stock (par value of $100) that pays an 8% dividend. The dividend has not been paid this year or for the 2 previous years. How much must the company pay the customer per share before it may pay dividends to the common stockholders?

$24.00

A technical analyst is least likely to consider which of the following when selecting securities?

Corporate earnings

Which of the following is not a characteristic of American depositary receipts (ADRs)?

Dividends are declared in the foreign currency, so exchange rate, or currency, risk is completely eliminated.

Which of the following statements concerning international investing is correct?

Information is not as readily available on foreign investments as on domestic ones.

Which of the following would NOT be of interest to a technical analyst?

P/E ratio

Which of the following is not included in fundamental analysis of a company?

The study of a company's historical stock prices and trading volume.

A client is considering the purchase of American depositary receipts (ADRs). She is looking to further diversify her portfolio. Which of the following is NOT a feature of this type of investment vehicle?

They are not subject to exchange rate, or currency, risk.

A client is considering the purchase of American depositary receipts (ADRs). She is looking to further diversify her portfolio. Which of the following is not a feature of this type of investment vehicle?

They are not subject to exchange rate, or currency, risk.

A stock has been in a downtrend for several days. When its price decreases to near $30, many investors enter orders to buy the stock and the price increases to $31. This is most likely an example of

a support level

An investor in an equity security

acquires an ownership interest in the company

A fundamental analyst would be interested in all of the following EXCEPT

daily trading volumes on the NYSE

Which of the following have equity positions in a corporation? i Common stockholders ii Preferred stockholders iii Convertible bondholders iv Mortgage bondholders

i and ii

An analytical tool used to project the current value of a common stock using projected future dividends is

the dividend discount model

Which of the following statements regarding a 100% stock dividend are TRUE? i The share price is reduced by half. ii The total market value of the outstanding stock decreases. iii The total market value of the outstanding stock may increase or decrease as a result of the split. iv The number of shares doubles.

i and iv

Which of the following statements about technical analysis are TRUE? i Technical analysis tries to identify trends and predict market changes. ii Technical analysis is often accomplished by reviewing data in the form of charts. iii Technical analysis looks primarily at past performance to predict future trends.

i, ii, and iii

To a technical analyst, the resistance level signifies the price at which a stock's supply would be expected to

increase substantially

The primary defining characteristic of an equity security is

it represents ownership in a corporation.

One of the rights of those owning common stock is the opportunity to vote on issues brought up at the corporation's annual meeting. To be eligible to cast a vote,

ownership must be established by the record date

A company that has issued cumulative preferred stock

pays past and current preferred dividends before paying dividends on common stock

One way in which incentive stock options (ISOs) differ from nonqualified stock options (NQSOs) is that

the bargain element of the ISO is an AMT preference item.

When reviewing potential securities to select for an investor's portfolio, a technical analyst would be most likely to evaluate

the daily trading volume

One of the rights of being a stockholder is the ability to vote on important corporate matters, such as the election of members to the board of directors. The date that determines which shareholders are eligible to votes is

the record date.

An employee is offered a nonqualified stock option with an exercise price of $20 per share. If the option is exercised when the current market value of the stock is $30, the employee

is taxed on $10 per share as if it were salary