Q8 - University of Houston-Victoria FIN 6352 Financial...

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Financial Management FMQuiz08 Dr. Xavier Garza Gómez University of Houston-Victoria FIN 6352 Financial Management Review Quiz for Chapter 8 – Stocks, Stock Valuation, and Stock Market Equilibrium True-False 1. After a new issue is brought to market it is the marginal investor who determines the price at which the stock will trade. a. True b. False 2. If two firms have the same current dividend and the same expected growth rate, their stocks must sell at the same current price or else the market will not be in equilibrium. a. True b. False 3. From a social welfare perspective, common stock is a desirable form of financing in part because it involves no fixed charge payments. Its inclusion in a firm's capital structure makes the firm less vulnerable to the consequences of unanticipated declines in sales and earnings than if only debt were available. a. True b. False Multiple Choice: Concepts 4. Which of the following statements is most correct? a. If a stock's beta increased but its growth rate remained the same, then the new equili- brium price of the stock will be higher (assuming dividends continue to grow at the constant growth rate). b. Market efficiency says that the actual realized returns on all stocks will be equal to the expected rates of return. c. An implication of the semistrong form of the efficient markets hypothesis is that you cannot consistently benefit from trading on information reported in The Wall Street Journal . d.
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This note was uploaded on 11/23/2008 for the course FIN 6352 taught by Professor Gomez during the Spring '08 term at TAMU Intl..

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Q8 - University of Houston-Victoria FIN 6352 Financial...

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