exam 3 final

exam 3 final - Question 1 10 out of 10 points Stock X has...

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Question 1 10 out of 10 points Stock X has the following data. Assuming the stock market is efficient and the stock is in equilibrium, which of the following statements is CORRECT? Expected dividend, D 1 $3.00 Current Price, P 0 $50 Expected constant growth rate 6.0% Answer Correct Answer: The stock’s expected dividend yield and growth rate are equal. Question 2 10 out of 10 points Stocks A and B have the same price and are in equilibrium, but Stock A has the higher required rate of return. Which of the following statements is CORRECT? Answer Correct Answer: If Stock A has a lower dividend yield than Stock B, its expected capital gains yield must be higher than Stock B’s. Question 3 10 out of 10 points The preemptive right is important to shareholders because it Answer Correct Answer: protects the current shareholders against a dilution of their ownership interests. Question 4 0 out of 10 points Stocks A and B have the following data. Assuming the stock market is efficient and the stocks are in equilibrium, which of the following statements is CORRECT? A B Price $25 $25 Expected growth (constant) 10% 5% Required return 15% 15% Answer Correct Answer:
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Stock A's expected dividend at t = 1 is only half that of Stock B. Question 5 10 out of 10 points When a new issue of stock is brought to market, it is the marginal investor who determines the price at which the stock will trade. Answer Correct Answer: True Question 6 10 out of 10 points A proxy is a document giving one party the authority to act for another party, including the power to vote shares of common stock. Proxies can be important tools relating to control of firms. Answer Correct Answer: True Question 7 10 out of 10 points If a firm's stockholders are given the preemptive right , this means that stockholders have the right to call for a meeting to vote to replace the management. Without the preemptive right, dissident stockholders would have to seek a change in management through a proxy fight . Answer Correct Answer: Fals e Question 8 10 out of 10 points A share of common stock just paid a dividend of $1.00. If the expected long-run growth rate for this stock is 5.4%, and if investors' required rate of return is 13.9%, what is the stock price? Answer Correct Answer: $12.40 Question 9 10 out of 10 points Goode Inc.'s stock has a required rate of return of 11.50%, and it sells for $18.00 per share. Goode's dividend is expected to grow at a constant rate of 7.00%. What was the last dividend, D ?
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Answer Correct Answer: $0.76 Question 10 10 out of 10 points If D = $1.75, g (which is constant) = 3.6%, and P = $31.00, what is the stock’s expected total return for the coming year? Answer
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This note was uploaded on 02/27/2012 for the course FIN FIN3403 taught by Professor C.kalogeras during the Spring '09 term at FIU.

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exam 3 final - Question 1 10 out of 10 points Stock X has...

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