!FIN301_Sample_Exam03 - FIN 301, S04 - EXAM #2 SAMPLE EXAM...

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SAMPLE EXAM FIN 301, S04 -- EXAM #3 SAMPLE EXAM Multiple Choice Identify the letter of the choice that best completes the statement or answers the question. ____ 1. An increase in a firm's expected growth rate would normally cause the firm's required rate of return to a. Increase. b. Decrease. c. Fluctuate. d. Remain constant. e. Possibly increase, possibly decrease, or possibly remain unchanged. ____ 2. Companies can issue different classes of common stock. Which of the following statements concerning stock classes is most correct? a. All common stocks fall into one of three classes: A, B, and C. b. Most firms have several classes of common stock outstanding. c. All common stock, regardless of class, must have voting rights. d. All common stock, regardless of class, must have the same dividend privileges. e. None of the statements above is necessarily true. ____ 3. Most studies of stock market efficiency suggest that the stock market is highly efficient in the weak form and reasonably efficient in the semistrong form. On the basis of these findings which of the following statements is correct? a. Information you read in The Wall Street Journal today cannot be used to select stocks that will consistently beat the market. b. The stock price for a company has been increasing for the past 6 months. On the basis of this information it must be true that the stock price will also increase during the current month. c. Information disclosed in companies' most recent annual reports can be used to consistently beat the market. d. Statements a and c are correct. e. All of the statements above are correct. ____ 4. The last dividend paid by Klein Company was $1.00. Klein's growth rate is expected to be a constant 5 percent for 2 years, after which dividends are expected to grow at a rate of 10 percent forever. Klein's required rate of return on equity (k s ) is 12 percent. What is the current price of Klein's common stock? a. $21.00 b. $33.33 c. $42.25 d. $50.16 e. $58.75 ____ 5. Dawson Energy is expected to pay an end-of-year dividend, D 1 , of $2.00 per share, and it is expected to grow at a constant rate over time. The stock has a required rate of return of 14 percent and a dividend yield, D 1 /P 0 , of 5 percent. What is the expected price of the stock five years from today? a.
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This note was uploaded on 11/23/2010 for the course FINANCE 08FB40447 taught by Professor Raymond during the Spring '10 term at University of Manchester.

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!FIN301_Sample_Exam03 - FIN 301, S04 - EXAM #2 SAMPLE EXAM...

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