21. The counter area on the floor of the NYSE where a
specialist operates is called a:
A. pit.
B. hot spot.
C. seat.
D. post.
E. DOT.
22. A securities market primarily comprised of dealers
who buy and sell for their own inventories is referred to which type of
market?
A. auction
B. private
C. over-the-counter
D. regional
E. electronic network
23. An ECN is best described as:
A. an electronic network which transmits orders directly to the floor of
the NYSE.
B. the network used in the primary market for selling newly issued shares.
C. the international trading network of the NYSE.
D. a website that allows individual investors to trade directly with one
another.
E. a computerized network used by independent brokers.
24. 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.
25. 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
26. High Country Builders currently pays an annual
dividend of $1.35 and plans on increasing that amount by 2.5 percent each year.
Valley High Builders currently pays an annual dividend of $1.20 and plans on
increasing its dividend by 3 percent annually. Given this information, you know
for certain that the stock of High Country Builders’ has a higher ______ than the
stock of Valley High Builders.
A. market price
B. dividend yield
C. capital gains yield
D. total return
E. The answer cannot be determined based on the information provided.
27. The dividend growth model:
I. assumes that dividends increase at a constant rate forever.
II. can be used to compute a stock price at any point in time.
III. can be used to value zero-growth stocks.
IV. requires the growth rate to be less than the required return.
A. I and III only
B. II and IV only
C. I, III, and IV only
D. I, II, and IV only
E. I, II, III, and IV
28. Which one of the following is an underlying
assumption of the dividend growth model?
A. A stock has the same value to every investor.
B. A stock’s value is equal to the discounted present value of the future
cash flows which it generates.
C. A stock’s value changes in direct relation to the required return.
D. Stocks that pay the same annual dividend have equal market values.
E. The dividend growth rate is inversely related to a stock’s market
price.
29. Answer this question based on the dividend growth
model. If you expect the market rate of return to increase across the board on
all equity securities, then you should also expect:
A. an increase in all stock values.
B. all stock values to remain constant.
C. a decrease in all stock values.
D. dividend-paying stocks to maintain a constant price while non-dividend
paying stocks decrease in value.
E. dividend-paying stocks to increase in price while non-dividend paying
stocks decrease in value.
30. Which one of the following statements is correct
concerning the two-stage dividend growth model?
A. G1 cannot be negative.
B. Pt = Dt/R.
C. G1 must be greater than G2.
D. G1 can be greater than R.
E. R must be less than G1 but greater than G2.
