Chapter 8 Test Bank

Chapter 8 Test Bank - CHAPTER 7 Equity Markets and Stock...

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CHAPTER 7 Equity Markets and Stock Valuation I. DEFINITIONS Topic: GROWING PERPETUITY 1. An asset characterized by cash flows that increase at a constant rate forever is called a: A) Growing perpetuity. B) Growing annuity. C) Common annuity. D) Perpetuity due. E) Preferred stock. Answer: A Topic: DIVIDEND GROWTH MODEL 2. The stock valuation model that determines the current stock price as the next dividend divided by the (discount rate less the dividend growth rate) is called the: A) Zero growth model. B) Dividend growth model. C) Capital Asset Pricing Model. D) Earnings capitalization model. Answer: B Topic: DIVIDEND YIELD 3. A stock's next expected dividend divided by the current stock price is the: A) Current yield. B) Total yield. C) Dividend yield. D) Capital gains yield. E) Earnings yield. Answer: C Topic: CAPITAL GAINS YIELD 4. The rate at which the stock price is expected to appreciate (or depreciate) is the: A) Current yield. B) Total yield. C) Dividend yield. D) Capital gains yield. E) Earnings yield. Answer: D
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Topic: COMMON STOCK 5. Equity without priority for dividends or in the event of bankruptcy is called: A) Dual class stock. B) Cumulative stock. C) Deferred stock. D) Preferred stock. E) Common stock. Answer: E Topic: PREFERRED STOCK 6. Equity with priority for dividends and in the event of bankruptcy is called: A) Dual class stock. B) Cumulative stock. C) Deferred stock. D) Preferred stock. E) Common stock. Answer: D Topic: CUMULATIVE VOTING 7. The voting procedure where shareholders may cast all of their votes for one member of the board is: A) Democratic voting. B) Cumulative voting. C) Straight voting. D) Deferred voting. E) Proxy voting. Answer: B Topic: STRAIGHT VOTING 8. The voting procedure where shareholders may cast all of their votes for each member of the board is: A) Democratic voting. B) Cumulative voting. C) Straight voting. D) Deferred voting. E) Proxy voting. Answer: C Topic: PROXY VOTING 9. The voting procedure where shareholders grant authority to another individual to vote their shares is called: A) Democratic voting. B) Cumulative voting. C) Straight voting. D) Deferred voting. E) Proxy voting.
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Answer: E
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Topic: DUAL CLASS STOCK 10. Equity with differential voting rights and/or dividend payment claims is called: A) Dual class stock. B) Cumulative stock. C) Deferred stock. D) Preferred stock. E) Common stock. Answer: A Topic: PREEMPTIVE RIGHT 11. Preemptive right refers to: A) The right of shareholders to share proportionately in dividends paid. B) The right of shareholders to share proportionately in any new stock issues sold. C) The right of shareholders to share proportionately in liquidated assets. D) The right of shareholders to vote at annual shareholder meetings. E)
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This note was uploaded on 05/10/2011 for the course FIN 3716 taught by Professor Fang during the Spring '10 term at LSU.

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Chapter 8 Test Bank - CHAPTER 7 Equity Markets and Stock...

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