Question: Which one of the following best describes Nasdaq?
Answer Options:
Largest U.S. stock market in terms of dollar trading volume
Market where dealers buy at the asked price
Market where the designated market makers are located at posts
Computer network of securities dealers
Market with three physical trading floors
Answer: D — Computer network of securities dealers
Question: A firm paid an annual dividend of $1.97 per share yesterday. Today, the company announced that future dividends will be increasing by 3.8 percent annually. If you require a return of 11.4 percent, how much are you willing to pay to purchase one share of this stock today?
Answer Options:
$25.92
$28.88
$17.94
$26.91
$17.28
Answer: D — $26.91
Question: A firm made two announcements concerning its common stock today. First, the company announced that the next annual dividend will be $1.54 per share. Secondly, all dividends after that will decrease by 1.16 percent annually. What is the value of this stock at a discount rate of 9 percent?
Answer Options:
Not listed
Answer: $15.16
Question: A firm just paid an annual dividend of $2.69 per share and is expected to increase that amount by 5.2 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 12.6 percent at the time of your purchase?
Answer Options:
Not listed
Answer: $40.23
Question: A firm’s common stock sells for $58.49 per share and pays an annual dividend that increases by 1.3 percent annually. The market rate of return on this stock is 12.6 percent. What is the amount of the last dividend paid?
Answer Options:
$6.60
$5.86
$6.52
$6.98
$5.64
Answer: C — $6.52
Question: A firm is going to pay an annual dividend of $2.05 per share next year. This year, the company paid a dividend of $2 per share. The company adheres to a constant rate of growth dividend policy. What will one share of this common stock be worth six years from now if the applicable discount rate is 11.2 percent?
Answer Options:
$26.94
$28.00
$26.28
$27.33
$26.66
Answer: D — $27.33
Question: A firm plans on increasing its annual common stock dividend by 21 percent per year for the next four years and then maintaining a growth rate of 4 percent per year indefinitely. The company just paid its annual dividend in the amount of $3.75 per share. What is the current value of one share of this stock if the required rate of return is 10.25 percent?
Answer Options:
$108.88
$118.16
$109.60
$104.79
$113.71
Answer: C — $109.60
Question: A firm is preparing to pay annual dividends to common stockholders of $1.48, $1.60, and $1.75 per share over the next three years, respectively. After that, the annual dividend will be $1.90 per share indefinitely. What is this stock worth to you per share if you require a return of 14.6 percent?
Answer Options:
$11.22
$12.21
$12.32
$11.47
$12.03
Answer: C — $12.32
Question: A firm’s stock pays a constant dividend of $1.46 per share. The company announced today that it will continue to pay the dividend for another 2 years and then in Year 3 it will pay a final liquidating dividend of $15.25 per share. What is one share of this stock worth today at a required return of 18.5 percent?
Answer Options:
$12.92
$11.44
$12.07
$13.09
$14.20
Answer: B — $11.44
Question: A firm paid its first annual dividend yesterday in the amount of $.15 per share. The company plans to double the dividend in each of the next 3 years. Starting in Year 4, the firm plans to pay $1.50 per share indefinitely. What is one share of this stock worth today if the market rate of return on similar securities is 13.8 percent?
Answer Options:
$11.02
$10.77
$8.92
$10.26
$11.79
Answer: C — $8.92
Question: A stock currently sells for $64 per share and the required return is 12 percent. The total return is evenly divided between the capital gains yield and the dividend yield. What is the current dividend per share if it’s the company’s policy to always maintain a constant growth rate in its dividends?
Answer Options:
$4.09
$3.62
$4.02
$3.56
$3.84
Answer: B — $3.62
Question: A preferred stock will pay an annual dividend of $12 per share in perpetuity beginning 8 years from now. What is one share of this stock worth today if the market requires a return of 9.5 percent?
Answer Options:
$66.92
$64.16
$69.08
$61.11
$63.09
Answer: A — $66.92
Question: A firm expects its dividends to grow at 25 percent per year for the next seven years before levelling off to a constant 3 percent growth rate. The required return is 11 percent. What is the current stock price if the annual dividend per share that was just paid was $1.05?
Answer Options:
$43.21
$44.36
$38.93
$32.11
$39.96
Answer: A — $43.21
Question: Currently, a firm has an EPS of $2.08 and a benchmark PE of 12.7. Earnings are expected to grow by 3.8 percent annually. What is the estimated current stock price?
Answer Options:
$27.42
$27.09
$26.08
$26.42
$28.13
Answer: D — $26.42