Question 1

In which of the following stock exchange specialists act as the auctioneers:
A) New York Stock Exchange
B) London Stock Exchange
C) Tokyo Stock Exchange
D) Frankfurt Stock Exchange

Accepted Answer

The New York Stock Exchange (NYSE) is known for its specialist system, in which specialists act as auctioneers for specific stocks, maintaining orderly markets by buying and selling shares to balance supply and demand.

Question 2

The following is an example of a dealer market:
A) New York Stock Exchange
B) London Stock Exchange
C) Tokyo Stock Exchange
D) Nasdaq

Accepted Answer

Nasdaq is a dealer market because it is composed of multiple market makers who buy and sell securities from their own inventory at quoted prices. The other options listed are all examples of auction markets, where buyers and sellers come together to trade securities through a centralized order book.

Question 3

Deluxe Company expects to pay a dividend of $2 per share at the end of year-1, $3 per share at the end of year-2 and then be sold for $32 per share. If the required rate on the stock is 15%, what is the current value of the stock?
A) $28.20
B) $32.17
C) $32.00
D) None of the given answers

Accepted Answer

A

Question 4

The following are auction markets except:
A) New York Stock Exchange
B) London Stock Exchange
C) Tokyo Stock Exchange
D) Nasdaq

Accepted Answer

All options except D are auction markets, where buyers and sellers physically gather to buy and sell securities. Nasdaq is a dealer market, where buyers and sellers trade through intermediaries rather than directly with each other.

Question 5

World-Tour Co. has just now paid a dividend of $2.83 per share (D0); the dividends are expected to grow at a constant rate of 6% per year forever. If the required rate of return on the stock is 16%, what is the current value on stock, after paying the dividend?
A) $30
B) $56
C) $70
D) $48

Accepted Answer

The answer of World-Tour Co. has just now paid a...

Question 6

The following are foreign companies that are traded on the New York Stock Exchange: 
I. Toyota
II. Brasil Telecom
III. Nokia
IV. Endesa
V. General Electric
A) I, II and III only
B) I,II, III and IV only
C) I,II,III and V only
D) All of the given companies are foreign companies

Accepted Answer

The answer of The following are foreign companies that are...

Question 7

In which of the following exchanges a computer acts as the auctioneer:
I. New York Stock Exchange
II) London Stock Exchange
III) Tokyo Stock Exchange 
IV) Frankfurt Stock Exchange
A) I, II, III, and IV
B) I, III, and IV only
C) I, II, and III only
D) II, III, and IV only

Accepted Answer

The answer of In which of the following exchanges a...

Question 8

The Wall Street Journal quotation for a company has the following values: Div: $1.12, PE: 18.3, Close: $37.22. Calculate the dividend pay out ratio for the company (Approximately).
A) 18%
B) 55%
C) 45%
D) None of the above

Accepted Answer

Dividend payout ratio = Dividend per share / Earnings per share
Earnings per share = Close / PE = 37.22 / 18.3 = $2.03
Dividend payout ratio = 1.12 / 2.03 = 0.55 = 55% (approximately)

Question 9

Assume General Electric (GE) has about 10.3 billion shares outstanding and the stock price is $37.10. Also assume the P/E ratio is about 18.3. Calculate the market capitalization for GE. (Approximately)
A) $679 billion
B) $188 billion
C) $382 billion
D) None of the above

Accepted Answer

Market capitalization = Shares outstanding x Stock price
Market capitalization for GE = 10.3 billion x $37.10 = $382 billion
The P/E ratio is not needed to calculate market capitalization.

Question 10

CK Company stockholders expect to receive a year-end dividend of $5 per share and then be sold for $115 dollars per share. If the required rate of return for the stock is 20%, what is the current value of the stock?
A) $100
B) $122
C) $132
D) $110

Accepted Answer

The answer of CK Company stockholders expect to receive a...

Question 11

The constant dividend growth formula P0 = Div1/(r - g) assumes: I) the dividends are growing at a constant rate g forever.
II) r > g
III) g is never negative.
A) I only
B) II only
C) I and II only
D) III only

Accepted Answer

The constant dividend growth formula assumes that the dividends will grow at a constant rate forever, and that the required rate of return is greater than the dividend growth rate. These assumptions are expressed in statements I and II, therefore choice C is correct. Statement III does not need to be explicitly stated in the formula, as it is already encompassed in statement I (i.e. if the dividends never decrease, then g could never be negative).

Question 12

The exchange-traded fund (EFT) that tracks the Nasdaq 100 index is called:
A) SPDR
B) DIAMONDS
C) QQQQ
D) None of the above

Accepted Answer

QQQQ tracks the Nasdaq 100 index, while SPDR tracks the S&P 500 index and DIAMONDS tracks the Dow Jones Industrial Average index. Therefore, the best choice would be C for tracking the Nasdaq 100 index.

Question 13

Super Computer Company's stock is selling for $100 per share today. It is expected that this stock will pay a dividend of 6 dollars per share, and then be sold for $114 per share at the end of one year. Calculate the expected rate of return for the shareholders.
A) 20%
B) 15%
C) 10%
D) 25%

Accepted Answer

The answer of Super Computer Company's stock is selling for...

Question 14

The dividend yield reported as Yld. % in The Wall Street Journal quotation is calculated as follows:
A) (dividends/hi)
B) (dividends/lo)
C) (dividends/close)
D) None of the above

Accepted Answer

The dividend yield is calculated by dividing the annual dividends per share by the stock's closing price. Therefore, the correct formula for calculating the dividend yield is (dividends/close).

Question 15

The value of a common stock today depends on:
A) Number of shares outstanding and the number of shareholders
B) The expected future dividends and the discount rate
C) The Wall Street analysts
D) Present value of the future earnings per share

Accepted Answer

The value of a common stock is dependent on the expected future dividends and the discount rate. The present value of expected future earnings per share is also a factor in determining the value of the stock, but this is captured by the expected dividends. The number of shares outstanding and the number of shareholders do not directly impact the value of the stock. Wall Street analysts may provide insights into the value of the stock, but their opinions are not the sole determinant of its value.

Question 16

If the Volume is reported in 100s as 292,059 in the Wall Street Journal quotation, then the trading volume for that day of trading is:
A) 292,059 shares
B) 2,920,590 shares
C) 29,205,900 shares
D) 292,059,000 shares

Accepted Answer

Since the volume is reported in 100s, we need to multiply the reported number by 100 to get the actual trading volume. Therefore, 292,059 x 100 = 29,205,900 shares.

Question 17

The major secondary market for GE shares is:
A) London Stock Exchange
B) New York Stock Exchange
C) Nasdaq
D) none of the above

Accepted Answer

The New York Stock Exchange is the major secondary market for GE shares.

Question 18

Casino Inc. is expected to pay a dividend of $3 per share at the end of year-1 (D1) and these dividends are expected to grow at a constant rate of 6% per year forever. If the required rate of return on the stock is 18%, what is current value of the stock today?
A) $25
B) $50
C) $100
D) $54

Accepted Answer

The answer of Casino Inc. is expected to pay a...

Question 19

Will Co. is expected to pay a dividend of $2 per share at the end of year -1(D1) and the dividends are expected to grow at a constant rate of 4% forever. If the current price of the stock is $20 per share calculate the expected return or the cost of equity capital for the firm.
A) 10%
B) 4%
C) 14%
D) None of the above.

Accepted Answer

To calculate the expected return or the cost of equity capital for the firm we can use the Gordon growth model:

Ke = (D1 / P0) + g

where:
Ke = cost of equity capital
D1 = expected dividend payment at the end of year 1 ($2)
P0 = current price of the stock ($20)
g = expected dividend growth rate (4%)

Plugging the values we get,

Ke = (2/20) + 0.04
Ke = 0.10 or 10%

Therefore, the expected return or the cost of equity capital for the firm is 10%.

Question 20

If the Wall Street Journal Quotation for a company has the following values close: 55.14; Net chg: = + 1.04; then the closing price for the stock for the previous trading day was?
A) $56.18
B) $54.10
C) $55.66
D) None of the above.

Accepted Answer

The previous day's closing price can be calculated by subtracting the net change from the current close. Therefore, previous day’s closing price = 55.14 - 1.04 = $54.10.

Quiz 4: The Value of Common Stocks

In which of the following stock exchange specialists act as the auctioneers:

The following is an example of a dealer market:

Deluxe Company expects to pay a dividend of $2 per share at the end of year-1, $3 per share at the end of year-2 and then be sold for $32 per share. If the required rate on the stock is 15%, what is the current value of the stock?

The following are auction markets except:

World-Tour Co. has just now paid a dividend of $2.83 per share (D0) ; the dividends are expected to grow at a constant rate of 6% per year forever. If the required rate of return on the stock is 16%, what is the current value on stock, after paying the dividend?

The following are foreign companies that are traded on the New York Stock Exchange: I. Toyota II. Brasil Telecom III. Nokia IV. Endesa V. General Electric

In which of the following exchanges a computer acts as the auctioneer: I. New York Stock Exchange II) London Stock Exchange III) Tokyo Stock Exchange IV) Frankfurt Stock Exchange

The Wall Street Journal quotation for a company has the following values: Div: $1.12, PE: 18.3, Close: $37.22. Calculate the dividend pay out ratio for the company (Approximately) .

Assume General Electric (GE) has about 10.3 billion shares outstanding and the stock price is $37.10. Also assume the P/E ratio is about 18.3. Calculate the market capitalization for GE. (Approximately)

CK Company stockholders expect to receive a year-end dividend of $5 per share and then be sold for $115 dollars per share. If the required rate of return for the stock is 20%, what is the current value of the stock?

The constant dividend growth formula P0 = Div1/(r - g) assumes: I) the dividends are growing at a constant rate g forever. II) r > g III) g is never negative.

The exchange-traded fund (EFT) that tracks the Nasdaq 100 index is called:

Super Computer Company's stock is selling for $100 per share today. It is expected that this stock will pay a dividend of 6 dollars per share, and then be sold for $114 per share at the end of one year. Calculate the expected rate of return for the shareholders.

The dividend yield reported as Yld. % in The Wall Street Journal quotation is calculated as follows:

The value of a common stock today depends on:

If the Volume is reported in 100s as 292,059 in the Wall Street Journal quotation, then the trading volume for that day of trading is:

The major secondary market for GE shares is:

Casino Inc. is expected to pay a dividend of $3 per share at the end of year-1 (D1) and these dividends are expected to grow at a constant rate of 6% per year forever. If the required rate of return on the stock is 18%, what is current value of the stock today?

Will Co. is expected to pay a dividend of $2 per share at the end of year -1(D1) and the dividends are expected to grow at a constant rate of 4% forever. If the current price of the stock is $20 per share calculate the expected return or the cost of equity capital for the firm.

If the Wall Street Journal Quotation for a company has the following values close: 55.14; Net chg: = + 1.04; then the closing price for the stock for the previous trading day was?