Chapter 8 Multiple choice question

What is the model called that determines the present value of a stock based on its next annual dividend, the dividend growth rate, and the applicable discount rate?

• zero growth

• dividend growth

• capital pricing

• earnings capitalization

• discounted dividend

Which one of the following is computed by dividing next year's annual dividend by the current stock price?

• yield to maturity

• total yield

• dividend yield

• capital gains yield

• growth rate

Which one of following is the rate at which a stock's price is expected to appreciate?

• current yield

• total return

• dividend yield

• capital gains yield

• coupon rate

Which one of the following types of stock is defined by the fact that it receives no preferential treatment in respect to either dividends or bankruptcy proceedings?

• dual class

• cumulative

• non-cumulative

• preferred

• common

What are the distributions to shareholders by a corporation called?

• retained earnings

• net income

• dividends

• capital payments

• diluted profits

Which one of the following is a type of equity security that has a fixed dividend and a priority status over other equity securities?

• senior bond

• debenture

• warrant

• common stock

• preferred stock

Callander Enterprises stock is listed on NASDAQ. The firm is planning to issue some new equity shares for sale to the general public. This sale will occur in which one of the following markets?

• private

• auction

• exchange floor

• secondary

• primary

The secondary market is best defined by which one of the following?

• market in which subordinated shares are issued and resold

• market conducted solely by brokers

• market dominated by dealers

• market where outstanding shares of stock are resold

• market where warrants are offered and sold

An agent who maintains an inventory from which he or she buys and sells securities is called a:

• broker

• trader

• capitalist

• principal

• dealer

National Trucking has paid an annual dividend of $1.00 per share on its common stock for the past fifteen years and is expected to continue paying a dollar a share long into the future. Given this, one share of the firm's stock is:

• basically worthless as it offers no growth potential.

• equal in value to the present value of $1 paid one year from today.

• priced the same as a $1 perpetuity.

• valued at an assumed growth rate of one percent.

• worth $1 a share in the current market.