PRACTICE CHAPTER 7

# PRACTICE CHAPTER 7 - PRACTICE CHAPTER 7 FIN 101 CSUS Which...

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PRACTICE CHAPTER 7: FIN 101 CSUS Which of the following are reasons that make valuing a share of stock more difficult than valuing a bond? ans: all of the following are answers. The required rate of return is unobservable Stock has no set maturity. Dividends are unknown and uncertain If a zero-dividend stock is purchased for \$80 and sold one year later for \$84, the 1- year return is…. percent: ans: (84/80)-1=%5 A zero-growth stock pays a dividend of \$2 per share and has a discount rate of %10. The stock’s price will be…. ans: 20/0.10=20 Which one of the following is true about dividend growth patterns? ans: Dividends may grow at a constant rate. What information do we need to determine the value of a stock using the zero growth model? ans: Discount rate Dividend If a company’s growth for years 1 through 3 is %20 but stabilizes at %5 beginning in year 4, its growth pattern would be described as…. ans: non-constant What is the total return for a stock that currently sells for \$50, just paid a \$1.75 dividend, and has a constant growth rate of %8?

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• Fall '09
• Financial Ratio, Stock exchange, P/E ratio

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