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chapter 7
| Question | Answer |
|---|---|
| 1. The stock valuation process which determines the price of a stock by dividing the next period’s dividend by the discount rate less the dividend growth rate is called the: | dividend growth model |
| 2. A stock which pays a constant dollar dividend over an extended period of time is referred to as a _____ stock. | zero growth |
| 3. The Bigelow Co. increases their annual dividend by 3 percent each and every year. This stock is referred to as a(n) _____ stock. | constant growth |
| 4. The dividends paid by the Jon Stone Co. over the past 4 years were $.40, $1.00, $1.10, and $1.13, respectively. The name given to this type of stock is: | nonconstant growth. |
| 5. Next year’s expected annual dividend divided by today’s stock price is called the stock’s: | dividend yield. |
| 6. The rate at which the value of an investment grows is called the: | capital gains yield. |
| 7. The type of security which represents ownership in a firm without priority for dividends or priority in a bankruptcy is called _____ stock. | common |
| 8. Cumulative voting refers to the process in which a shareholder: | may cast all votes for one member of the board of directors. |
| 9. Straight voting is defined as the process where the directors are elected: | one at a time. |
| 10. The authority granted by a shareholder that permits another individual to vote that shareholder’s shares is called a: | proxy. |
| 11. Payments to shareholders by a corporation that represent a return on capital are called: | dividends. |
| 12. Stock which generally pays a fixed dividend and receives priority in the payment of dividends and the distribution of corporate assets is called _____ stock. | preferred |
| 13. The market in which new securities are originally sold to investors is called the _____ market. | primary |
| 14. The market where one shareholder sells shares to another shareholder is called the _____ market. | secondary |
| 15. A dealer is an agent who: | buys and sells securities from inventory. |
| 16. An agent who arranges security transactions among investors is a called a: | broker. |
| 17. An owner of a seat on the NYSE is called a: | member. |
| 18. The persons who execute customer buy and sell orders on the floor of the NYSE are called: | commission brokers. |
| 19. The market maker who deals in a small number of securities on the exchange floor is called the: | specialist. |
| 20. Members who execute orders on a fee basis for commission brokers are referred to as: | floor brokers. |
| 21. The electronic system that transmits orders directly to a specialist on the floor of the NYSE is called the: | SuperDOT system. |
| 22. An independent individual who trades for his or her own account by buying and selling on the floor of the NYSE is referred to as a(n): | floor trader. |
| 23. Order flow can be defined as the: | stream of customer orders to buy and sell securities. |
| 24. The location on the floor of an exchange where an individual security is traded is called the: | specialist’s post. |
| 25. Inside quotes are defined as the: | lowest ask quotes and the highest bid quotes for a security. |
| 26. A Web site that enables an investor to trade directly with another investor is called a(n): | ECN |
| 27. The current price of a stock is based: | on the present value of all the future cash flows from that stock. |
| 28. The price of a stock at year 10 can be expressed as: | P11 ÷ (1+g). |
| 29. Last year, the Brown Bike Co. paid an annual dividend of $1.80 per share. The company has a dividend policy which calls for constant dividends. The sales of the firm are increasing by 2 percent each year. What is the anticipated dividend for year 4? | $1.80 |
| 30. If the dividend in year 3 is $1.20 and the growth rate is 3 percent, then the dividend in year 7 is equal to: | $1.20 × (1.03)4. |
| 31.Baker Aluminum is planning on paying a dividend of $.60 a share next year. They expect to increase this dividend by 20% per yr in both yrs 2 & 3 and by 10% in year 4. Which one of the following is the correct method of computing the dividend for yr 4? | $.60 × (1.22 × 1.1) |
| 32. Eat ‘n Run pays a constant dividend. At the end of trading on Monday, the price of their stock was $21.64. At the end of trading on Tuesday, the stock price was $22.03. The dividend yield Tuesday night is _____ it was on Monday night. | lower than |
| 33. A low dividend yield on a stock indicates that the stock: | pays out a small percentage of the stock’s value in dividends. |
| 34. The capital gains yield, as used in the dividend growth model, is symbolized as: | g. |
| 35. Assume that you own a stock with a market price of $30. This stock pays a constant dividend of $1.50 a share. If the price of the stock suddenly rises to $40, you would expect the: | capital gains yield to increase and the dividend yield to decrease |
| 36. The required return for a stock is based on the dividend yield: | plus the capital gains yield. |
| 37. The required return: | provides an estimate of the return an investor might expect if he or she purchases a stock at today’s market price |
| 38. The benefit of cumulative voting is: | the ability of shareholders, who own fewer shares, to elect at least one corporate director of their choice. |
| 39. With straight voting, the only means of guaranteeing yourself a seat on the corporate board of directors is to: | ensure that you have enough votes to control the entire election. |
| 40Which of the following r rights that r provided2cmmn shareholders? I.right2vote on proposed merger II.right2share in ivdnd distributions III.right2determine the amount of 1/4 dvdnd pymnt IV.right2share in any assets remaining after the liblties | I, II, and IV only |
| 41. If shareholders are granted a preemptive right they will be: | given the first right to purchase any new shares of stock that are issued. |
| 42. Dividends become a liability of a firm: | when the dividend is declared but are not tax deductible at any time. |
| 43. Dividends are paid at the discretion of the: | board of directors. |
| 44. Preferred stock: | has a higher claim in a liquidation than the common stock |
| 45. Preferred stock: I. may be callable. II. may be convertible. III. may have a sinking fund. IV. pays dividends that are taxed differently than common stock dividends. | I, II, and III only |
| 46. A dealer earns a profit by: | retaining the spread. |
| 47. The NYSE: I.is the largest stock market in the world based on $ volume of activity. II.is principally owned by the Bank of New York. III.is a pure dealer market. IV.requires that all trades on the floor be between a broker and a specialist. | I only |
| 48. The largest number of owners of the NYSE are registered as: | commission brokers. |
| 49. Many of the smaller orders sent to the floor of the NYSE are: | electronically transmitted to the specialists. |
| 50. NASDAQ is a(n): | electronic dealer market. |
| 51. The NASDAQ consists of: | two separate markets, a National Market and a SmallCap market. |
| 52. Trading on an ECN is conducted between an investor and: | another investor. |
| 53. The Over-the-Counter Bulletin Board (OTCBB): | may quote prices as low as .0001. |
Created by:
martin.2021