Valuing Stocks

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Question 1

Free

Multiple Choice

Which of these investors earn returns from receiving dividends and from stock price appreciation?

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bondholders

stockholders

investment bankers

managers

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Question 2

Free

Multiple Choice

As residual claimants, which of these investors claim any cash flows to the firm that remain after the firm pays all other claims?

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creditors

bondholders

preferred stockholders

common stockholders

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Question 3

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Multiple Choice

When residual cash flows are high, stock values will be

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unchanged.

low.

high.

unpredictable.

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Question 4

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Multiple Choice

Trading at physical exchanges like the New York Stock Exchange and the American Stock Exchange takes place

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at dealers' trading posts.

at brokers' trading posts.

at dealers' computers.

at market markers.

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Question 5

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Multiple Choice

Why is the ask price higher than the bid price?

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It represents the gain a market maker achieves.

It represents the gain the stock seller achieves.

It represents the gain the stock buy achieves.

It represents the gain all participants will achieve.

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Question 6

Multiple Choice

The Dow Jones Industrial Average (DJIA) includes

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all of the stock listed on the New York Stock Exchange.

30 of the largest (market capitalization) and most active companies in the U.S. economy.

500 firms that are the largest in their respective economic sectors.

500 firms that are the largest as ranked by Fortune Magazine.

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Question 7

Multiple Choice

The Standard & Poor's 500 Index includes

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all of the stock listed on the New York Stock Exchange.

30 of the largest (market capitalization) and most active companies in the U.S. economy.

500 firms that are the largest in their respective economic sectors.

500 firms that are the largest as ranked by Fortune Magazine.

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Question 8

Multiple Choice

The NASDAQ Composite includes

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all of the stocks listed on the NASDAQ Stock Exchange.

30 of the largest (market capitalization) and most active companies in the U.S. economy.

500 firms that are the largest in their respective economic sectors.

500 firms that are the largest as ranked by Fortune Magazine.

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Question 9

Multiple Choice

Which of the following will only be executed if the order's price conditions are met?

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a trade

a limit order

an unlimited order

a spread

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Question 10

Multiple Choice

Investors buy stock at the

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dealer price.

bid price.

quoted ask price.

broker price.

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Question 11

Multiple Choice

Investors sell stock at the

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dealer price.

bid price.

quoted ask price.

broker price.

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Question 12

Multiple Choice

Which of these are valued as a special zero-growth case of the constant growth rate model?

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common stock

preferred stock

future dividends

future stock prices

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Question 13

Multiple Choice

Stock valuation model dynamics make clear that lower discount rates lead to

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lower valuations.

higher valuations.

lower growth rates.

higher growth rates.

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Question 14

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Stock valuation model dynamics make clear that higher growth rates lead to

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lower valuations.

higher valuations.

lower growth rates continuing.

higher growth rates continuing.

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Question 15

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We can estimate a stock's value by

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using the book value of the total stockholder equity section.

discounting the future dividends and future stock price appreciation.

compounding the past dividends and past stock price appreciation.

using the book value of the total assets divided by the number of shares outstanding.

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Question 16

Multiple Choice

Many companies grow very fast at first, but slower future growth can be expected. Such companies are called

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Fortune 500 companies.

blue chip companies.

variable growth rate firms.

constant growth rate firms.

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Question 17

Multiple Choice

We often use the P/E ratio model with the firm's growth rate to estimate

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required rates of return.

inflation.

a stock's current price.

a stock's future price.

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Question 18

Multiple Choice

Value stocks usually have

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low P/E ratios and high growth rates.

high P/E ratios and low growth rates.

low P/E ratios and low growth rates.

high P/E ratios and high growth rates.

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Question 19

Multiple Choice

Dividend yield is defined as

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the last four quarters of dividend income expressed as a percentage of the par value of the stock.

the last four quarters of dividend income expressed as a percentage of the current stock price.

the last dividend paid expressed as a percentage of the current stock price.

the next dividend to be paid expressed as a percentage of the current stock price.

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Question 20

Multiple Choice

The size of the firm measured as the current stock price multiplied by the number of shares outstanding is referred to as the firm's

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market capitalization.

book value.

market makers.

constant growth model.

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