1
Finance 355: Investments
Sample Quiz 2
1.
The rate that banks charge each other for overnight loans of $1 million or more is called the
_____ rate.
a.
institutional
b.
financial overnight
c.
Federal funds
d.
monetary
e.
daily
2.
The Whirlwind Co. just paid an annual dividend of $2.10 a share. The firm expects to pay
dividends forever and to increase the dividend by 2.5 percent annually. What is the current
value of this stock if the required return is 11 percent?
3.
A party which buys and sells securities from inventory is called a(n):
4.
Based on the expectations theory, the term structure of interest rates will be _____ anytime
investors believe that interest rates will be lower in the future than they are today.
5.
Dover Mills just paid an annual dividend of $.40 a share. Management estimates the
dividend will increase by 15 percent a year for the next three years. After that, the dividend
growth rate is estimated at 3.5 percent. The required rate of return is 12 percent. What is the
value of this stock today?
a.
$6.54
b.
$7.03
c.
$7.78
d.
$8.03
e.
$8.54
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 Fall '08
 phsiao
 Finance, Interest Rates

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