Reference no: EM132619790

Problem 1: A company sells preferred stock with the provision that the company can repurchase the shares from the shareholder at a predetermined price. Which of the following describes this stock?

Group of answer choices

Option 1: Participating preferred stock.

Option 2: Convertible preferred stock.

Option 3: Callable preferred stock.

Option 4: All of these answers.

Problem 2: Which of the following statements regarding stock indexes is true?

Group of answer choices

Option 1: All of these answers.

Option 2: A stock market index is computed using the prices of selected stocks.

Option 3: A global index measures investor sentiment on the state of a national economy.

Option 4: An investor can invest directly in a stock index.

Problem 3: Which of the following statements regarding capital distributions and investor preferences is correct?

Group of answer choices

Option 1: Firms that require new capital to continue operations have limited growth potential.

Option 2: Investors seeking higher capital growth may prefer a lower payout ratio.

Option 3: Investors seeking high current income and limited capital growth prefer high dividend payout ratios.

Option 4: All of these answers.

Problem 4: Which of the following is a known limitation associated with valuing a company with dividends that have a nonconstant growth rate?

Group of answer choices

Option 1: The models are sensitive to the differences between the dividend growth and discount factors.

Option 2: All of these answers.

Option 3: The valuation is based on company comparisons and requires analysis beyond a simple calculation.

Option 4: An analyst can justify any valuation by fine-tuning the growth/discount assumptions.