Problem 1. According to the constant growth dividend discount model, an increase in the required rate of return of stock will (everything else equal):
a. Increase the value of the stock.
b. Decrease the value of the stock.
c. Not have any effect on the value of the stock.
d. May either increase or decrease the value of the stock.
Problem 2. If you invest $500 today at an annual rate of 8% compounded semi-annually, what will it grow to be in five years?
a. $740.10
b. $734.65
c. $608.35
d. $1,079.45
Problem 3. According to the constant growth dividend discount model, an increase in the dividend growth rate of a stock will (everything else equal):
a. Increase the value of the stock.
b. Decrease the value of the stock.
c. Not have any effect on the value of the stock.
d. may either increase or decrease the value of the stock.
Problem 4. The future value of an investment today is greater:
a. The lower the interest rate.
b. The greater the time the investment is allowed to grow.
c. The less frequent the compounding.
d. The greater its turnover.
Problem 5. If you were going to lend money to a health care organization for a 90-day period, which one of the organization's ratios would you focus on:
a. Assets to equity.
b. Current ratio.
c. Return on equity.
d. Average collection period.