1. Which of the following securities gives the right to vote for directors if the company does not pay the dividend for a specified period?
a. Income stock
b. Common equity
c. Preferred stock **ANSWER**
d. Founders' share
2. The growth rate of a stock, g, represents the stock's:
a. capital gains rate (yield). **ANSWER**
b. dividend yield.
c. annual change in investors' required rate of return.
d. total return.
3. Which of the following is true about the change in the price of a stock?
a. If investors demand higher returns to invest in stocks, then prices should increase.
b. If investors demand lower returns to invest in stocks, then prices should fall.
c. If investors expect their investments to generate higher future cash flows, then prices should fall.
d. If investors expect their investments to generate lower future cash flows, then prices should fall.