Topic 6 Equities Market

Topic 6

Equities Market

Multiple Choice

Bond value is determined by

• Present value of dividends

• Present value of coupons

• Present value of ALL cash flows

Multiple Choice

Firm value is determined by

• Present value of dividends

• Present value of coupons

• Present value of ALL cash flows

Multiple Choice

Wil Inc. has earnings of $4 per share & does not reinvest its funds & not expected to show earnings growth.

What is their share price assuming a cost of equity of 10%?

• 4 / 0.10

  
  

  = $40

• 4 / 10

  
  

  = $0.40

• .1 / 4

  
  

  =$0.025

• 10 / 4

  
  

  = $2.50

Multiple Choice

Wil Inc. issued 5,000 shares - $10 par value.

These shares were issued @ $25 per share.

The correct journal entry to record this transaction is:

• DR Cash $125,000

  CR Common stock $125,000

• DR Cash $125,000

  CR Common stock $50,000

  CR Paid-in capital 75,000

• DR Cash $50,000

  CR Common stock $50,000

OPEN OUTCRY -

Since the 1980s, the open outcry systems have been being replaced by electronic trading systems 

Multiple Choice

A person who purchases common stock of a corporation is known as:

• preferred stockholder

• bond holder

• common stockholder

Multiple Choice

Which of the following statements is NOT true about preferred stock?

• The rate of dividend is usually fixed

• Stockholders always have a voting right

• Stockholders' usually have a preference as to dividends

Multiple Choice

Unpaid dividends are carried forward to the future periods for which type of stock?

• Common stock

• Cumulative preferred stock

• Non-cumulative preferred stock

• All of the above