1) The value of a financial asset is the ________.
A) present value of all of the future cash flows that will be received
B) sum of all previous cash flows received
C) future value of just the capital gains but not the dividends
D) present value of just the capital gains but not the dividends
2) You want to invest in a stock that pays $6.00 annual cash dividends for the next five years. At the end of the five years, you will sell the stock for $30.00. If you want to earn 10% on this investment, what is a fair price for this stock if you buy it today?
A) $41.37
B) $40.37
C) $22.75
D) $18.63
3) The next dividend (Div1) is $1.80, the growth rate (g) is 6%, and the required rate of return (r) is 12%. What is the stock price, according to the constant growth dividend model?
A) $31.80
B) $30.80
C) $30.00
D) $15.00
4) Strong-form efficient markets theory proclaims that ________.
A) one can chart historical stock prices to predict future stock prices such that you can identify mispriced stocks and routinely outperform the market
B) one can exploit publicly available news or financial statement information to routinely outperform the market
C) current prices reflect the price and volume history of the stock, all publicly available information, and all private information
D) current prices reflect the price and volume history of the stock, all publicly available information, but no private information
5) ________ may be defined as a measure of uncertainty in a set of potential outcomes for an event in which there is a chance for some loss.
A) Diversification
B) Risk
C) Uncertainty
D) Collaboration