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sampletest2 - SAMPLE TEST FOR BUAD 306 MIDTERM 2 Please...

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SAMPLE TEST FOR BUAD 306 MIDTERM 2 Please note that the actual test will have 25 to 35 questions. Also, the actual test will have more or less equal weight on all chapters and more or less equal weight on concepts versus problems. c 1. The price a dealer is willing to pay for a security held by an investor is called the: a. equilibrium price. b. ask price. c. bid price. d. bid-ask spread. e. auction price. c 2. The James River Co. pays an annual dividend of $1.50 per share on its common stock. This dividend amount has been constant for the past 15 years and is expected to remain constant. Given this, one share of James River Co. stock: a. is basically worthless as it offers no growth potential. b. has a market value equal to the present value of $1.50 paid one year from today. c. is valued as if the dividend paid is a perpetuity. d. is valued with an assumed growth rate of 3 percent. e. has a market value of $15.00. b 3. The underlying assumption of the dividend growth model is that a stock is worth: a. the same amount to every investor regardless of their desired rate of return. b. the present value of the future income which the stock generates. c. an amount computed as the next annual dividend divided by the market rate of return. d. the same amount as any other stock that pays the same current dividend and has the same required rate of return. e. an amount computed as the next annual dividend divided by the required rate of return. a 4. Shareholders generally have the right to: I. elect the corporate directors. II. select the senior management of the firm. III. elect the chief executive officer (CEO). IV. elect the chief operating officer (COO). a. I only b. I and III only c. II only d. I and II only e. III and IV only a 5. The owner of preferred stock: a. is entitled to a distribution of income prior to the common shareholders. b. has the right to veto the outcome of an election held by the common shareholders. c. has the right to declare the company bankrupt whenever there are insufficient funds to pay dividends to the common shareholders. d. receives tax-free dividends if they are an individual and own more than 20 percent of the outstanding preferred shares. e. has the right to collect payment on any unpaid dividends as long as the stock is noncumulative preferred. d 6. The closing price of a stock is quoted at 22.87, with a P/E of 26 and a net change of 1
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7. Based on this information, which one of the following statements is correct? a. The closing price on the previous day was $1.42 higher than today’s closing price. b. A dealer will buy the stock at $22.87 and sell it at $26 a share. c. The stock increased in value between yesterday’s close and today’s close by $.0142. d.
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This note was uploaded on 11/26/2008 for the course BUAD 306 taught by Professor Selvili during the Spring '07 term at USC.

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sampletest2 - SAMPLE TEST FOR BUAD 306 MIDTERM 2 Please...

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