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172a Ex2_f01 - 1 One reason why macroeconomic analysis is...

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1. One reason why macroeconomic analysis is important in stock valuation is because there is a strong relationship (perhaps with lags or leads) between economic activity and stock prices. (a) True (b) False 2. Which of the following variables in the dividend discount model is not affected by industry or economic factors? (a) the required rate of return (b) the expected growth rate in dividends (c) the risk of the individual stock (d) all of the above are affected by industry and economic factors 3. ROE is an important factor because it affects 4. If the expectation is for the economy to expand some time in the next 6 months or so (i.e., the stock market is about to rise shortly), a stock investor should allocate a greater share of her portfolio to (a) low beta stocks (b) cyclical stocks, especially those with high betas (c) cyclical stocks, especially those with low betas 5. A high-tech company experiencing rapid growth does not pay any cash dividend and has no plans to do so in the future. The company has, however, periodically bought back its shares to “help support or raise the price of the stock”, according to its announcements. Since all the dividend terms are zero, its intrinsic value will be zero 6. The dividend discount model (DDM) says that the intrinsic value of a stock is equal to the present value of all future dividend streams (a) True ; (b) False 7. The required rate of return can be estimated as follows
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