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The Economics of Money, Banking, and Financial Markets,
9e (Mishkin) – Global Edition
Chapter 7
The Stock Market, the Theory of Rational Expectations, and the Efficient
Market Hypothesis
7.1
Computing the Price of Common Stock
1) A stockholder's ownership of a company's stock gives her the right to
A) vote and be the primary claimant of all cash flows.
B) vote and be the residual claimant of all cash flows.
C) manage and assume responsibility for all liabilities.
D) vote and assume responsibility for all liabilities.
Answer:
B
Ques Status:
Previous Edition
2) Stockholders are residual claimants, meaning that they
A) have the first priority claim on all of a company's assets.
B) are liable for all of a company's debts.
C) will never share in a company's profits.
D) receive the remaining cash flow after all other claims are paid.
Answer:
D
Ques Status:
Previous Edition
3) Periodic payments of net earnings to shareholders are known as
A) capital gains.
B) dividends.
C) profits.
D) interest.
Answer:
B
Ques Status:
Previous Edition
4) The value of any investment is found by computing the
A) present value of all future sales.
B) present value of all future liabilities.
C) future value of all future expenses.
D) present value of all future cash flows.
Answer:
D
Ques Status:
Previous Edition
5) In the oneperiod valuation model, the value of a share of stock today depends upon
A) the present value of both dividends and the expected sales price.
B) only the present value of the future dividends.
C) the actual value of the dividends and expected sales price received in one year.
D) the future value of dividends and the actual sales price.
Answer:
A
Ques Status:
Revised
1
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View Full Document6) In the oneperiod valuation model, the current stock price increases if
A) the expected sales price increases.
B) the expected sales price falls.
C) the required return increases.
D) dividends are cut.
Answer:
A
Ques Status:
Previous Edition
7) In the oneperiod valuation model, an increase in the required return on investments in equity
A) increases the expected sales price of a stock.
B) increases the current price of a stock.
C) reduces the expected sales price of a stock.
D) reduces the current price of a stock.
Answer:
D
Ques Status:
Revised
8) Using the oneperiod valuation model, assuming a yearend dividend of $0.11, an expected
sales price of $110, and a required rate of return of 10%, the current price of the stock would be
A) $110.11.
B) $121.12.
C) $100.10.
D) $100.11
Answer:
C
Ques Status:
Previous Edition
9) Using the oneperiod valuation model, assuming a yearend dividend of $1.00, an expected
sales price of $100, and a required rate of return of 5%, the current price of the stock would be
A) $110.00.
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 Spring '11
 JW
 Financial Markets

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