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The person on the floor of the NYSE who executes buy and sell orders on behalf of customers is called a(n) :


A) floor trader.
B) dealer.
C) specialist.
D) executor.
E) commission broker.

F) B) and D)
G) All of the above

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Which one of the following statements is correct?


A) The capital gains yield is the annual rate of change in a stock's price.
B) Preferred stocks have constant growth dividends.
C) A constant dividend stock cannot be valued using the dividend growth model.
D) The dividend growth model can be used to compute the current value of any stock.
E) An increase in the required return will decrease the capital gains yield.

F) C) and D)
G) C) and E)

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Southern Utilities just issued some new preferred stock.The issue will pay a $19 annual dividend in perpetuity beginning 9 years from now.What is one share of this stock worth today if the market requires a 7 percent return on this investment?


A) $157.97
B) $164.16
C) $189.08
D) $241.41
E) $271.43

F) A) and B)
G) None of the above

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Explain the primary change that occurred in the structure of the NYSE in 2006 and how that change affected the exchange members.

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In 2006, the NYSE became a publicly owne...

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Boston Free Press has a dividend policy whereby the firm pays a constant annual dividend of $2.40 per share of common stock.The firm has 1,000 shares of stock outstanding.The company:


A) must always show a current liability of $2,400, ($2.40 × 1,000) , for dividends payable.
B) must still declare each dividend before it becomes an actual company liability.
C) is obligated to pay $2.40 per share each year in perpetuity.
D) will be declared in default if it does not pay at least $2.40 per share per year on a timely basis.
E) has a liability that must be paid at a later date should the company miss paying an annual dividend payment.

F) B) and D)
G) All of the above

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Langley Enterprises pays a constant dividend of $0.85 a share.The company announced today that it will continue to pay the dividend for another 2 years after which time all dividends will cease.What is one share of this stock worth today if the required rate of return is 16.5 percent?


A) $0.92
B) $1.36
C) $2.04
D) $2.09
E) $2.20

F) A) and D)
G) A) and E)

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Electronics, Inc.common stock returned a nifty 23.5 percent rate of return last year.The dividend amount was $0.25 a share which equated to a dividend yield of 0.95 percent.What was the rate of price appreciation for the year?


A) 22.55 percent
B) 23.38 percent
C) 23.60 percent
D) 23.87 percent
E) 23.52 percent

F) C) and E)
G) B) and C)

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Roy's Welding Supplies common stock sells for $38 a share and pays an annual dividend that increases by 3 percent annually.The market rate of return on this stock is 8.20 percent.What is the amount of the last dividend paid?


A) $1.80
B) $1.86
C) $1.92
D) $1.98
E) $2.10

F) C) and D)
G) A) and E)

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


A) yield to maturity
B) total yield
C) dividend yield
D) capital gains yield
E) growth rate

F) D) and E)
G) A) and C)

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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:


A) basically worthless as it offers no growth potential.
B) equal in value to the present value of $1 paid one year from today.
C) priced the same as a $1 perpetuity.
D) valued at an assumed growth rate of one percent.
E) worth $1 a share in the current market.

F) A) and E)
G) B) and C)

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Which one of the following statements related to the NYSE is correct?


A) Commission brokers work on behalf of brokerage firm clients.
B) Shareholders of NYSE Group, Inc.own "seats" on the exchange.
C) Specialists buy at the asked price.
D) The NYSE is primarily a dealer's market.
E) Floor brokers earn income in the form of a bid-ask spread.

F) B) and D)
G) A) and E)

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Which one of these statements related to preferred stock is correct?


A) Preferred shareholders normally receive one vote per share of stock owned.
B) Preferred shareholders determine the outcome of any election that involves a proxy fight.
C) Preferred shareholders are considered to be the residual owners of a corporation.
D) Preferred stock normally has a stated liquidating value of $1,000 per share.
E) Cumulative preferred shares are more valuable than comparable non-cumulative shares.

F) A) and C)
G) B) and D)

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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?


A) private
B) auction
C) exchange floor
D) secondary
E) primary

F) B) and C)
G) All of the above

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Yesteryear Productions pays no dividend at the present time.The company plans to start paying an annual dividend in the amount of $0.40 a share for two years commencing four years from today.After that time, the company plans on paying a constant $0.75 a share annual dividend indefinitely.How much are you willing to pay to buy a share of this stock today if your required return is 11.6 percent?


A) $3.78
B) $4.22
C) $4.37
D) $4.71
E) $4.98

F) A) and C)
G) A) and D)

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The Stiller Corporation will pay a $3.80 per share dividend next year.The company pledges to increase its dividend by 2.4 percent indefinitely.How much are you willing to pay to purchase this company's stock today if you require a 6.9 percent return on your investment?


A) $55.07
B) $63.09
C) $72.22
D) $78.47
E) $84.44

F) B) and D)
G) A) and C)

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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?


A) dual class
B) cumulative
C) non-cumulative
D) preferred
E) common

F) C) and D)
G) B) and E)

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Renew It, Inc., is preparing to pay its first dividend.It is going to pay $0.45, $0.60, and $1 a share over the next three years, respectively.After that, the company has stated that the annual dividend will be $1.25 per share indefinitely.What is this stock worth to you per share if you demand a 10.8 percent rate of return on stocks of this type?


A) $6.67
B) $8.21
C) $10.14
D) $11.47
E) $12.03

F) C) and D)
G) A) and D)

Correct Answer

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Which of the following features do preferred shareholders and bondholders frequently have in common? I.lack of voting rights II.conversion option into common stock III.annuity payments IV.fixed liquidation value


A) I and II only
B) III and IV only
C) II, III, and IV only
D) I, III, and IV only
E) I, II, III, and IV

F) A) and E)
G) B) and E)

Correct Answer

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Chemical Mines has 5,000 shareholders and is preparing to elect two new board members. You do not own enough shares to personally control the elections but are determined to oust the current leadership.Likewise, no other single shareholder owns sufficient shares to personally control the outcome of the election.Which one of the following is the most likely outcome of this situation given that some shareholders are happy with the existing management?


A) negotiated settlement where each side is granted control over one of the open seats
B) protracted legal battle over control of the board of directors
C) arbitrated settlement where the arbitrator determines who will be elected to the board
D) control of the board decided without your influence
E) proxy fight for control of the board

F) C) and E)
G) B) and D)

Correct Answer

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