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