CH7 - According to the dividend discount model a stock's...

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1. According to the dividend discount model, a stock's price today depends on the investor's horizon for holding the stock. True False ( 1 ) 2. The intent of technical analysis is to discover patterns in past stock prices. True False ( 1 ) 3. Market efficiency implies that security prices impound new information quickly. True False ( 1 ) 4. If the stock prices follow a random walk, successive stock prices fluctuate above and below a normal long-run price. True False ( 1 ) 5. If a stock's P/E ratio is 13.5 at a time when earnings are \$3 per year, what is the stock's current price? \$4.50 \$18.00 \$22.22 \$40.50 P/E = 13.5X Then P = 13.5 x \$3 Price = \$40.50 ( 1 ) 6. The book value of a firm's equity is determined by: multiplying share price by shares outstanding. multiplying share price at issue by shares outstanding. the difference between book values of assets and liabilities. the difference between market values of assets and liabilities. ( 1 ) 7. A stock paying \$5 in annual dividends sells now for \$80 and has an expected return of 14%. What might investors expect to pay for the stock one year from now? \$82.20 \$86.20 \$87.20 \$91.20 ( 1 ) 8. Which of the following statements is correct about a stock currently selling for \$50 per share that has a 16% expected return and a 10% expected capital appreciation? Its expected dividend exceeds the actual dividend. Its expected return will exceed the actual return.

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It is expected to pay \$3 in annual dividends. It is expected to pay \$8 in annual dividends. Expected return = expected dividend yield + expected capital appreciation. 16% = expected dividend yield + 10% 6% = expected dividend yield \$50 share price x 6% = \$3 expected dividend payment ( 1 ) 9. According to the dividend discount model, the current value of a stock is equal to the: present value of all expected future dividends. sum of all future expected dividends. next expected dividend, discounted to the present. discounted value of all dividends growing at a constant rate. ( 1
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CH7 - According to the dividend discount model a stock's...

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