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An agent who arranges a transaction between a buyer and a seller of equity securities is called a:


A) broker.
B) floor trader.
C) capitalist.
D) principal.
E) dealer.

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

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The owner of one of the 1,366 trading licenses for the NYSE is called a:


A) broker.
B) member.
C) agent.
D) specialist.
E) dealer.

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

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

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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 -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) A) and C)

Correct Answer

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An increase in which of the following will increase the current value of a stock according to the dividend growth model? I.dividend amount II.number of future dividends,provided the current number is less than infinite III.discount rate IV.dividend growth rate


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

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

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-Crystal Glass recently paid $3.60 as an annual dividend.Future dividends are projected at $3.80,$4.10,and $4.25 over the next 3 years,respectively.Beginning 4 years from now,the dividend is expected to increase by 3.25 percent annually.What is one share of this stock worth to you if you require a 12.5 percent rate of return on similar investments? A) $42.92 B) $43.40 C) $45.12 D) $45.88 E) $46.50 -Crystal Glass recently paid $3.60 as an annual dividend.Future dividends are projected at $3.80,$4.10,and $4.25 over the next 3 years,respectively.Beginning 4 years from now,the dividend is expected to increase by 3.25 percent annually.What is one share of this stock worth to you if you require a 12.5 percent rate of return on similar investments?


A) $42.92
B) $43.40
C) $45.12
D) $45.88
E) $46.50

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

Correct Answer

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-Upper Crust Bakers just paid an annual dividend of $3.10 a share and is expected to increase that amount by 4 percent per year.If you are planning to buy 1,000 shares of this stock next year,how much should you expect to pay per share if the market rate of return for this type of security is 12 percent at the time of your purchase? A) $37.33 B) $38.16 C) $38.83 D) $41.91 E) $42.00 -Upper Crust Bakers just paid an annual dividend of $3.10 a share and is expected to increase that amount by 4 percent per year.If you are planning to buy 1,000 shares of this stock next year,how much should you expect to pay per share if the market rate of return for this type of security is 12 percent at the time of your purchase?


A) $37.33
B) $38.16
C) $38.83
D) $41.91
E) $42.00

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

Correct Answer

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Which one of the following statements applies to NASDAQ?


A) a partner with the London exchange
B) exchange floor is located in Chicago
C) single market maker for each listed security
D) broker's market
E) comprised of three separate markets

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

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You want to be on the board of directors of Wisely Foods.Since you are the only shareholder that will vote for you,you will need to own more than half of the outstanding shares of stock if you are to be elected to the board.What is the type of voting called that requires this level of stock ownership to be successfully elected under these conditions?


A) democratic
B) cumulative
C) straight
D) deferred
E) proxy

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

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Which one of the following players on the floor of the NYSE can be likened to part-time help because they are called to duty only when others are fully employed?


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

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

Correct Answer

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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?


A) zero growth
B) dividend growth
C) capital pricing
D) earnings capitalization
E) discounted dividend

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

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Which one of the following rights is never directly granted to all shareholders of a publicly-held corporation?


A) electing the board of directors
B) receiving a distribution of company profits
C) voting either for or against a proposed merger or acquisition
D) determining the amount of the dividend to be paid per share
E) having first chance to purchase any new equity shares that may be offered

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

Correct Answer

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-Marshall Arts Studios just paid an annual dividend of $1.36 a share.The firm plans to pay annual dividends of $1.50,$1.55,and $1.58 over the next 3 years,respectively.After that time,the dividends will be held constant at $1.70 per share.What is this stock worth today at a 9 percent discount rate? A) $14.08 B) $14.30 C) $16.67 D) $16.79 E) $18.49 -Marshall Arts Studios just paid an annual dividend of $1.36 a share.The firm plans to pay annual dividends of $1.50,$1.55,and $1.58 over the next 3 years,respectively.After that time,the dividends will be held constant at $1.70 per share.What is this stock worth today at a 9 percent discount rate?


A) $14.08
B) $14.30
C) $16.67
D) $16.79
E) $18.49

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

Correct Answer

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Which one of the following statements related to corporate dividends is correct?


A) Dividends are nontaxable income to shareholders.
B) Dividends reduce the taxable income of the corporation.
C) The Chief Executive Officer of a corporation is responsible for declaring dividends.
D) The Chief Financial Officer of a corporation determines the amount of dividend to be paid.
E) Corporate shareholders may receive a tax break on a portion of their dividend income.

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

Correct Answer

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-Hightower Pharmacy just paid a $3.10 annual dividend.The company has a policy of increasing the dividend by 4.2 percent annually.You would like to purchase 100 shares of stock in this firm but realize that you will not have the funds to do so for another four years.If you require a 16 percent rate of return,how much will you be willing to pay per share for the 100 shares when you can afford to make this investment? A) $31.50 B) $32.27 C) $33.12 D) $33.78 E) $34.47 -Hightower Pharmacy just paid a $3.10 annual dividend.The company has a policy of increasing the dividend by 4.2 percent annually.You would like to purchase 100 shares of stock in this firm but realize that you will not have the funds to do so for another four years.If you require a 16 percent rate of return,how much will you be willing to pay per share for the 100 shares when you can afford to make this investment?


A) $31.50
B) $32.27
C) $33.12
D) $33.78
E) $34.47

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

Correct Answer

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-Diets For You announced today that it will begin paying annual dividends next year.The first dividend will be $0.12 a share.The following dividends will be $0.15,$0.20,$0.50,and $0.75 a share annually for the following 4 years,respectively.After that,dividends are projected to increase by 4 percent per year.How much are you willing to pay to buy one share of this stock today if your desired rate of return is 8.5 percent? A) $11.67 B) $11.94 C) $12.78 D) $13.50 E) $13.86 -Diets For You announced today that it will begin paying annual dividends next year.The first dividend will be $0.12 a share.The following dividends will be $0.15,$0.20,$0.50,and $0.75 a share annually for the following 4 years,respectively.After that,dividends are projected to increase by 4 percent per year.How much are you willing to pay to buy one share of this stock today if your desired rate of return is 8.5 percent?


A) $11.67
B) $11.94
C) $12.78
D) $13.50
E) $13.86

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

Correct Answer

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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 -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 E)
G) None of the above

Correct Answer

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-Shares of Hot Donuts common stock are currently selling for $32.35.The last annual dividend paid was $1.25 per share and the market rate of return is 10.7 percent.At what rate is the dividend growing? A) 6.58 percent B) 8.67 percent C) 10.42 percent D) 12.60 percent E) 14.10 percent -Shares of Hot Donuts common stock are currently selling for $32.35.The last annual dividend paid was $1.25 per share and the market rate of return is 10.7 percent.At what rate is the dividend growing?


A) 6.58 percent
B) 8.67 percent
C) 10.42 percent
D) 12.60 percent
E) 14.10 percent

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

Correct Answer

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

Correct Answer

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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) None of the above

Correct Answer

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