Reference no: EM1316143

Multiple choice questions on stock valuation.

1.  Pluto's is offering a preferred stock for sale. This stock will pay an annual dividend of $6. If your required return is 6 percent, how much are you willing to pay for one share of this stock ?

a.       $62.74

b.       $66.51

c.        $70.50

d.       $74.73

e.        $100.00

2.  The required return for a stock is based on the dividend yield :

a.       minus the capital gains yield

b.       plus the capital gains yield

c.        divided by the capital gains yield

d.       multiplied by (1+ capital gains yield )

e.        plus (1+capital gains yield)

3.  Which of the following are rights that are generally provided to common sharesholders ?

I.            Right to vote on a proposed merger.

II.            Right to share in dividend distributions

III.            Right to determine the amount of a quarterly dividend payment

IV.            Right to share in any assets remaining after the liabilities have been paid in a liquidation.

a.       I and II only

b.       II and III only

c.        I , II and IV only

d.       II,III and IV only

e.        I,II,III and IV

4. Preferred stock :

a.       is a form of debt from a tax point of view.

b.       is always granted voting rights.

c.        pays a guranteed dividend

d.       has a higher claim in a liquidation than the common stock.

e.        is a form of debt from leagal perspective.

5.  The type of security which represents ownership in a firm without priority for dividends or priority in a bankrupty is called stock.

a.       convetibles

b.       senior

c.        common

d.       preferred

e.        treasury

6.  Stock which generally pays a fixed dividend and receives priority in the payment of dividends and the distribution of corporate assets is called stock.

a.       convetibles

b.       common

c.        priority

d.       senior

e.        preferred