
Q6 - Stocks
Authored by Jose Gallegos
Financial Education
University
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5 questions
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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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