Question 1

Using the stock valuation formula calculate the value of a share of stock if it is expected to pay $15 in dividends,in addition the dividends are expected to grow at a rate of 8 percent forever,and the investor's required rate of return is 10 percent.

Accepted Answer

A)  $6.50 
B)  $7.50 
C)  $12.00 
D)  $14.50

Question 2

Beta is the measure of how responsive a stock is to changes in the market portfolios,like the S&P 500.

Accepted Answer

A) True 
 B)False

Question 3

A firm may decide that the price per share for its stock is getting too high for the smaller investor so the company "splits the stock."

Accepted Answer

A) True 
 B)False

Question 4

As a shareholder in Titanic Shipping,Inc.,James Blue is one of the many actual owners.In case of the bankruptcy of the corporation,his liability would be limited to

Accepted Answer

A)  his ownership percentage of the actual loss. 
B)  the amount of his investment. 
C)  nothing at all. 
D)  what is left after selling the stock and subtracting the debt.

Question 5

The P/E ratio of a stock is 20,and its earnings per share is $5.25.What is the current selling price of the stock?

Accepted Answer

A)  $20 
B)  $75 
C)  $100 
D)  $105

Question 6

The net income of the firm is $4 million dollars.The firm will pay $500,000 in dividends to the preferred shareholders.There are currently 1 million shares of common stock outstanding.What are the earnings per share for this firm?

Accepted Answer

A)  $4.00 
B)  $3.50 
C)  $4.50 
D)  $3.00

Question 7

When the market becomes too bullish,the average P/E ratio will fall.

Accepted Answer

A) True 
 B)False

Question 8

________ are a company's distribution of its profits in the form of cash or stock to its owners.

Accepted Answer

A)  Dividends 
B)  Coupon interest payments 
C)  Equity payments 
D)  Shareholder divestments 
E)  None of the above

Question 9

As compared to growth stocks,income stocks pay ________ dividends with ________ growth in earnings.

Accepted Answer

A)  relatively high; relatively high 
B)  the same; relatively high 
C)  relatively high; relatively little 
D)  relatively high; moderate 
E)  relatively high; the same

Question 10

Berkshire Hathaway's "A" stock has never split.As a result,in mid-2014 one share of its stock was selling at a price of more than ________ per share.

Accepted Answer

A)  $190 
B)  $1,900 
C)  $19,000 
D)  $190,000

Question 11

What are the three factors that explain why stock values fluctuate?

Accepted Answer

The answer of What are the three factors that explain...

Question 12

Microsoft is an example of a company whose common stock is considered to be a growth stock.

Accepted Answer

A) True 
 B)False

Question 13

A buy-and-hold investment strategy

Accepted Answer

A)  avoids timing the market. 
B)  minimizes transaction costs. 
C)  postpones capital gains taxes. 
D)  means your gains will be taxed as long-term capital gains. 
E)  all of the above.

Question 14

A stock split is a tactic by a corporation to manipulate the market price of its stock.

Accepted Answer

A) True 
 B)False

Question 15

You cannot benefit from capital appreciation until you actually sell your stock.

Accepted Answer

A) True 
 B)False

Question 16

If your stock's beta was greater than 1.0 that indicates that your stock is more susceptible to movements in the market.

Accepted Answer

A) True 
 B)False

Question 17

Most of the stocks listed in the Dow Jones Industrials have high P/E ratios and are classified as speculative stocks.

Accepted Answer

A) True 
 B)False

Question 18

When a company buys back its own common stock it is engaging in a

Accepted Answer

A)  stock split. 
B)  stock reissue. 
C)  stock repurchase. 
D)  stock repo. 
E)  none of the above.

Exam 12: Investing in Stocks

Using the stock valuation formula calculate the value of a share of stock if it is expected to pay $15 in dividends,in addition the dividends are expected to grow at a rate of 8 percent forever,and the investor's required rate of return is 10 percent.

Beta is the measure of how responsive a stock is to changes in the market portfolios,like the S&P 500.

A firm may decide that the price per share for its stock is getting too high for the smaller investor so the company "splits the stock."

As a shareholder in Titanic Shipping,Inc.,James Blue is one of the many actual owners.In case of the bankruptcy of the corporation,his liability would be limited to

The P/E ratio of a stock is 20,and its earnings per share is $5.25.What is the current selling price of the stock?

The net income of the firm is $4 million dollars.The firm will pay $500,000 in dividends to the preferred shareholders.There are currently 1 million shares of common stock outstanding.What are the earnings per share for this firm?

When the market becomes too bullish,the average P/E ratio will fall.

________ are a company's distribution of its profits in the form of cash or stock to its owners.

As compared to growth stocks,income stocks pay dividends with growth in earnings.

Berkshire Hathaway's "A" stock has never split.As a result,in mid-2014 one share of its stock was selling at a price of more than ________ per share.

What are the three factors that explain why stock values fluctuate?

Microsoft is an example of a company whose common stock is considered to be a growth stock.

A buy-and-hold investment strategy

A stock split is a tactic by a corporation to manipulate the market price of its stock.

You cannot benefit from capital appreciation until you actually sell your stock.

If your stock's beta was greater than 1.0 that indicates that your stock is more susceptible to movements in the market.

Most of the stocks listed in the Dow Jones Industrials have high P/E ratios and are classified as speculative stocks.

When a company buys back its own common stock it is engaging in a