Question 1

P/E Ratio and Stock Price International Business Machines (IBM) has earnings per share of $6.85 and a P/E ratio of 15.19. What is the stock price?
A) $0.45
B) $2.22
C) $45.09
D) $104.05

Accepted Answer

The formula for calculating the stock price is: P/E ratio = stock price/earnings per share. Rearranging the formula gives: stock price = P/E ratio x earnings per share. Plugging in the values for IBM gives: stock price = 15.19 x 6.85 = $104.05. Therefore, the correct answer is D.

Question 2

Buying Stock with a Market Order You would like to buy shares of Nokia (NOK). The current bid and ask quotes are $20.13 and $20.15, respectively. You place a market buy-order for 300 shares that executes at these quoted prices. How much money did it cost to buy these shares?
A) $6.00
B) $6,039.00
C) $6,045.00
D) $12,084.00

Accepted Answer

The market buy-order executes at the ask price, which is $20.15. Therefore, buying 300 shares would cost 300 x $20.15 = $6,045.00.

Question 3

Buying Stock with Commission At your discount brokerage firm, it costs $9.95 per stock trade. How much money do you need to buy 100 shares of Ralph Lauren (RL), which trades at $85.13?
A) $8,503.05
B) $8,503.00
C) $8,522.95
D) $9,508.00

Accepted Answer

To buy 100 shares of Ralph Lauren at $85.13 per share, the total cost would be $8,513.00. With a $9.95 commission fee per trade, the total cost would be $8,522.95. Therefore, the correct choice is C.

Question 4

Buying Stock with a Market Order You would like to buy shares of International Business Machines (IBM). The current bid and ask quotes are $96.17 and $96.24, respectively. You place a market buy-order for 100 shares that executes at these quoted prices. How much money did it cost to buy these shares?
A) $7.00
B) $9,617.00
C) $9,624.00
D) $19,241.00

Accepted Answer

The market buy-order will execute at the ask price of $96.24 per share. Therefore, the total cost of buying 100 shares is 100 x $96.24 = $9,624.00.

Question 5

Buying Stock with Commission At your discount brokerage firm, it costs $8.50 per stock trade. How much money do you need to buy 200 shares of Apple (AAPL), which trades at $171.54?
A) $32,608.00
B) $34,299.50
C) $34,316.50
D) $36,008.00

Accepted Answer

To buy 200 shares of Apple at $171.54 per share, the total cost would be 200 x $171.54 = $34,308. 
In addition to the cost of the shares, there is a $8.50 commission per trade, so the total cost would be $34,308 + $8.50 = $34,316.50.

Question 6

P/E Ratio and Stock Price Ralph Lauren (RL) has earnings per share of $3.85 and a P/E ratio of 17.37. What is the stock price?
A) $0.22
B) $4.51
C) $22.16
D) $66.87

Accepted Answer

P/E ratio = Stock price / Earnings per share
17.37 = Stock price / $3.85
Stock price = 17.37 * $3.85
Stock price = $66.87

Question 7

Dividend Growth Annual dividends of Wal-Mart Stores (WMT) grew from $0.23 in 2000 to $0.83 in 2007. What was the annual growth rate?
A) 2.61%
B) 20.12%
C) 37.29%
D) 260.87%

Accepted Answer

The annual growth rate can be calculated using the formula:(Ending dividend / Beginning dividend)^(1 / Number of years) - 1In this case, the ending dividend is $0.83, the beginning dividend is $0.23, and the number of years is 7.Plugging these values into the formula, we get:($0.83 / $0.23)^(1 / 7) - 1 = 0.2012 or 20.12%Therefore, the annual growth rate is 20.12%.

Question 8

Dividend Growth Annual dividends of Pfizer, Inc. (PFE) grew from $0.38 in 2000 to $1.15 in 2007. What was the annual growth rate?
A) 2.02%
B) 17.14%
C) 28.95%
D) 202.63%

Accepted Answer

To calculate the annual growth rate, we can use the following formula: 
Annual Growth Rate = ((Ending Value / Beginning Value)^(1/Number of Years)) - 1

Plugging in the given values, we get: 
Annual Growth Rate = (($1.15 / $0.38)^(1/7)) - 1 = 17.14%

Therefore, the correct choice is B) 17.14%.

Question 9

P/E Ratio and Stock Price Pfizer, Inc. (PFE) has earnings per share of $2.09 and a P/E ratio of 11.02. What is the stock price?
A) $0.19
B) $5.27
C) $18.97
D) $23.03

Accepted Answer

The answer of P/E Ratio and Stock Price Pfizer, Inc....

Question 10

Selling Stock with Commissions At your full-service brokerage firm, it costs $120 per stock trade. How much money do you receive after selling 200 shares of Ralph Lauren (RL), which trades at $85.13?
A) $16,546.00
B) $16,906.00
C) $17,026.00
D) $17,146.00

Accepted Answer

First, we need to calculate the total cost of selling 200 shares at $85.13 per share.

200 shares x $85.13 per share = $17,026

Next, we need to subtract the $120 commission fee per trade.

$17,026 - $120 = $16,906

Therefore, the answer is B.

Question 11

Value of Dividends and Future Price A firm is expected to pay a dividend of $3.00 next year and $3.21 the following year. Financial analysts believe the stock will be at their target price of $80.00 in two years. Compute the value of this stock with a required return of 13 percent.
A) $50.00
B) $67.52
C) $67.82
D) $86.21

Accepted Answer

First, we need to calculate the present value of the expected dividends using the formula: 
PV = D1/(1+r) + D2/(1+r)²

PV = 3/(1+0.13) + 3.21/(1+0.13)² 
PV = 2.65 + 2.63 
PV = 5.28

Next, we need to calculate the present value of the future target price using the formula: 
PV = FV/(1+r)²

PV = 80/(1+0.13)² 
PV = 56.98

Finally, we can calculate the total value of the stock by adding the present value of the dividends and the present value of the future target price: 
Total Value = PV of Dividends + PV of Target Price 
Total Value = 5.28 + 56.98 
Total Value = 62.26

Therefore, the value of this stock with a required return of 13 percent is $67.82 (rounded to two decimal places), which is answer c.

Question 12

Selling Stock with a Limit Order You would like to sell 400 shares of International Business Machines (IBM). The current bid and ask quotes are $96.24 and $96.17, respectively. You place a limit sell-order at $96.20. If the trade executes, how much money do you receive from the buyer?
A) $38,464.00
B) $38,468.00
C) $38,480.00
D) $38,496.00

Accepted Answer

Since you are selling 400 shares, you will receive:
400 x $96.20 = $38,480.00

The limit sell-order at $96.20 will only execute if the bid reaches or exceeds that price. Therefore, since the bid is currently $96.24, your sell-order will execute and you will receive $38,480.00 from the buyer.

Question 13

Value a Constant Growth Stock Financial analysts forecast Target Corp (TGT) growth for the future to be 11 percent. Their recent dividend was $0.52. What is the value of their stock when the required rate of return is 11.89 percent?
A) $5.25
B) $6.48
C) $58.43
D) $64.85

Accepted Answer

The answer of Value a Constant Growth Stock Financial analysts...

Question 14

Value of Dividends and Future Price A firm is expected to pay a dividend of $2.00 next year and $2.14 the following year. Financial analysts believe the stock will be at their target price of $75.00 in two years. Compute the value of this stock with a required return of 10 percent.
A) $65.40
B) $66.67
C) $65.57
D) $79.14

Accepted Answer

Step 1: Calculate the present value of the dividends.
PV of Year 1 dividend = $2.00 / (1 + 0.10)^1 = $1.82
PV of Year 2 dividend = $2.14 / (1 + 0.10)^2 = $1.78

Step 2: Calculate the present value of the future stock price.
PV of future stock price = $75.00 / (1 + 0.10)^2 = $61.98

Step 3: Calculate the total value of the stock.
Total value of stock = PV of Year 1 dividend + PV of Year 2 dividend + PV of future stock price
Total value of stock = $1.82 + $1.78 + $61.98 = $65.57

Therefore, the best choice is C) $65.57 as it correctly calculates the value of the stock using the discounted cash flow model.

Question 15

Selling Stock with a Limit Order You would like to sell 100 shares of Pfizer, Inc. (PFE). The current bid and ask quotes are $27.22 and $27.25, respectively. You place a limit sell-order at $27.24. If the trade executes, how much money do you receive from the buyer?
A) $2,722.00
B) $2,724.00
C) $2,725.00
D) $5,446.00

Accepted Answer

A limit sell-order at $27.24 means that the stock can only be sold for a price of $27.24 or higher. Since the current ask price is $27.25, the order should be executed immediately. Therefore, the seller would receive $2,724.00 (100 shares x $27.24 per share).

Question 16

Value of a Preferred Stock If a preferred stock from Ecology and Environment, Inc. (EEI) pays $2.50 in annual dividends, and the required return on the preferred stock is 5.8 percent, what's the value of the stock?
A) $0.15
B) $0.43
C) $14.50
D) $43.10

Accepted Answer

The answer of Value of a Preferred Stock If a...

Question 17

Selling Stock with Commissions At your full-service brokerage firm, it costs $110 per stock trade. How much money do you receive after selling 100 shares of Time Warner, Inc. (TMX), which trades at $22.62?
A) $2,152.00
B) $2,262.00
C) $2,372.00
D) $2,388.20

Accepted Answer

The answer of Selling Stock with Commissions At your full-service...

Question 18

Stock Index Performance On November 27, 2007, The Dow Jones Industrial Average closed at 12,958.44, which was up 215.04 that day. What was the return (in percent) of the stock market that day?
A) -.017%
B) +.017%
C) -1.69%
D) +1.69

Accepted Answer

To calculate the return, we divide the change in the index value by the initial value and multiply by 100:

(return = change/initial value x 100)

So, the return for that day would be:

(215.04/12,743.40) x 100 = 1.69%

Since the index went up, the return is positive, so the correct answer is D, +1.69%.

Question 19

Value of a Preferred Stock If a preferred stock from Pfizer Inc. (PFE) pays $3.00 in annual dividends, and the required return on the preferred stock is 7 percent, what's the value of the stock?
A) $0.21
B) $0.43
C) $21.00
D) $42.86

Accepted Answer

The value of the preferred stock can be calculated using the formula Vp = D / Rp. In this case, Vp = 3 / 0.07 = $42.86. Therefore, option D is the correct answer. Options A, B, and C are not viable as they are much lower than the actual value of the stock.

Question 20

Value a Constant Growth Stock Financial analysts forecast Best Buy Company (BBY) growth for the future to be 13 percent. Their recent dividend was $0.49. What is the value of their stock when the required rate of return is 14.13 percent?
A) $3.92
B) $4.90
C) $43.36
D) $49.00

Accepted Answer

The answer of Value a Constant Growth Stock Financial analysts...

Quiz 8: Valuing Stocks

P/E Ratio and Stock Price International Business Machines (IBM) has earnings per share of $6.85 and a P/E ratio of 15.19. What is the stock price?

Buying Stock with a Market Order You would like to buy shares of Nokia (NOK) . The current bid and ask quotes are $20.13 and $20.15, respectively. You place a market buy-order for 300 shares that executes at these quoted prices. How much money did it cost to buy these shares?

Buying Stock with Commission At your discount brokerage firm, it costs $9.95 per stock trade. How much money do you need to buy 100 shares of Ralph Lauren (RL) , which trades at $85.13?

Buying Stock with Commission At your discount brokerage firm, it costs $8.50 per stock trade. How much money do you need to buy 200 shares of Apple (AAPL) , which trades at $171.54?

P/E Ratio and Stock Price Ralph Lauren (RL) has earnings per share of $3.85 and a P/E ratio of 17.37. What is the stock price?

Dividend Growth Annual dividends of Wal-Mart Stores (WMT) grew from $0.23 in 2000 to $0.83 in 2007. What was the annual growth rate?

Dividend Growth Annual dividends of Pfizer, Inc. (PFE) grew from $0.38 in 2000 to $1.15 in 2007. What was the annual growth rate?

P/E Ratio and Stock Price Pfizer, Inc. (PFE) has earnings per share of $2.09 and a P/E ratio of 11.02. What is the stock price?

Selling Stock with Commissions At your full-service brokerage firm, it costs $120 per stock trade. How much money do you receive after selling 200 shares of Ralph Lauren (RL) , which trades at $85.13?

Value of Dividends and Future Price A firm is expected to pay a dividend of $3.00 next year and $3.21 the following year. Financial analysts believe the stock will be at their target price of $80.00 in two years. Compute the value of this stock with a required return of 13 percent.

Selling Stock with a Limit Order You would like to sell 400 shares of International Business Machines (IBM) . The current bid and ask quotes are $96.24 and $96.17, respectively. You place a limit sell-order at $96.20. If the trade executes, how much money do you receive from the buyer?

Value a Constant Growth Stock Financial analysts forecast Target Corp (TGT) growth for the future to be 11 percent. Their recent dividend was $0.52. What is the value of their stock when the required rate of return is 11.89 percent?

Value of Dividends and Future Price A firm is expected to pay a dividend of $2.00 next year and $2.14 the following year. Financial analysts believe the stock will be at their target price of $75.00 in two years. Compute the value of this stock with a required return of 10 percent.

Selling Stock with a Limit Order You would like to sell 100 shares of Pfizer, Inc. (PFE) . The current bid and ask quotes are $27.22 and $27.25, respectively. You place a limit sell-order at $27.24. If the trade executes, how much money do you receive from the buyer?

Value of a Preferred Stock If a preferred stock from Ecology and Environment, Inc. (EEI) pays $2.50 in annual dividends, and the required return on the preferred stock is 5.8 percent, what's the value of the stock?

Selling Stock with Commissions At your full-service brokerage firm, it costs $110 per stock trade. How much money do you receive after selling 100 shares of Time Warner, Inc. (TMX) , which trades at $22.62?

Stock Index Performance On November 27, 2007, The Dow Jones Industrial Average closed at 12,958.44, which was up 215.04 that day. What was the return (in percent) of the stock market that day?

Value of a Preferred Stock If a preferred stock from Pfizer Inc. (PFE) pays $3.00 in annual dividends, and the required return on the preferred stock is 7 percent, what's the value of the stock?

Value a Constant Growth Stock Financial analysts forecast Best Buy Company (BBY) growth for the future to be 13 percent. Their recent dividend was $0.49. What is the value of their stock when the required rate of return is 14.13 percent?