Q6 - Stocks

Q6 - Stocks

University

5 Qs

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Q6 - Stocks

Q6 - Stocks

Assessment

Quiz

Financial Education

University

Practice Problem

Easy

Created by

Jose Gallegos

Used 2+ times

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5 questions

Show all answers

1.

MULTIPLE CHOICE QUESTION

2 mins • 20 pts

What is the assumption for using the Gordon growth model?

Required return on equity is less than the growth rate

Dividends are expected to decrease

Growth rate is greater than the required return on equity

Dividends are not expected to grow

2.

MULTIPLE CHOICE QUESTION

2 mins • 20 pts

What does a high PE ratio indicate?

Market expects earnings to decrease

Market feels the firm's earnings are high risk

Market feels the firm's earnings are low risk

Market expects earnings to rise in the future

3.

MULTIPLE CHOICE QUESTION

2 mins • 20 pts

What is the main implication of the generalized dividend valuation model?

Stock price is determined by the current market demand

Stock price is determined by the present value of dividends and nothing else matters

Stock price is determined by the company's assets

Stock price is determined by the future sales price

4.

MULTIPLE CHOICE QUESTION

2 mins • 20 pts

What is the expected constant growth rate in the Gordon growth model?

Greater than the required return on equity

Less than the required return on equity

Not related to the required return on equity

Equal to the required return on equity

5.

MULTIPLE CHOICE QUESTION

2 mins • 20 pts

What is the value of a firm's stock using the PE ratio approach?

PE ratio added to expected earnings

PE ratio multiplied by expected earnings

PE ratio divided by expected earnings

PE ratio subtracted from expected earnings

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