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    1. Preferred stock is similar to a bond in the following 

    way (Points : 1)

     

     

          

    preferred stock always contains a maturity 

    date.

          

    both investments provide a stated income 

    stream.

          

    both contain a growth factor similar to common 

    stock.

          

    both provide interest 

    payments.

     

     

     

     

     

     

     

    2. Positive Tronics Industries preferred stock has a par 

    value of $100 and pays a dividend of $6.00 per share. It presently sells for $87 

    per share. What do investors require as a rate of return on this stock? Round 

    off to the nearest .10%. (Points : 1)

     

           

    14.5%

          

    9.3%

          

    6.9%

          

    6.0%

     

     

     

     

     

     

     

     

     

    3. Assume that Brady Corp. has an issue of 18-year $1,000 

    par value bonds that pay 7% interest, annually. Further assume that today’s 

    required rate of return on these bonds is 5%. How much would these bonds sell 

    for today? Round off to the nearest $1. (Points : 1)

     

           

    $1,233.79

          

    $1,201.32

          

    $1,134.88

          

    $1,032.56

     

     

     

     

     

     

     

     

     

    4. You decide you want your child to be a millionaire. You 

    have a son today and you deposit $15,000 in an investment account that earns 9% 

    per year. The money in the account will be distributed to your son whenever the 

    total reaches $1,000,000. How old will your son be when he gets the money 

    (rounded to the nearest year)? (Points : 1)

     

           

    82 years

          

    74 years

          

    60 years

          

    49 years

     

     

     

     

     

     

     

     

     

    5. Lily Co. paid a dividend of $5.25 on its common stock 

    yesterday. The company’s dividends are expected to grow at a constant rate of 

    8.5% indefinitely. If the required rate of return on this stock is 15.5%, 

    compute the current value per share of Lily Co. stock. (Points : 1)

     

           

    $81.38

          

    $76.43

          

    $56.23

          

    $43.90

     

     

     

     

     

     

     

     

     

    6. Halverson, Inc. just issued $1,000 par 20-year bonds. 

    The bonds sold for $936 and pay interest semi-annually. Investors require a rate 

    of 7.00% on the bonds. What is the amount of the semi-annual interest payment on 

    the bonds? (Points : 1)

     

           

    $64.50

          

    $55.00

          

    $32.00

          

    $21.75

     

     

     

     

     

     

     

     

     

    7. What is the value of a preferred stock that pays a $4.50 

    dividend to an investor with a required rate of return of 10%? (Points : 1)

     

           

    $22.22

          

    $27.83

          

    $45

          

    $55.50

     

     

     

     

     

     

     

     

     

    8. What is the value of a bond that matures in 17 years, 

    makes an annual coupon payment of $50, and has a par value of $1,000? Assume a 

    required rate of return of 6%. (Points : 1)

     

           

    $822.90

          

    $856.29

          

    $895.23

          

    $904.87

     

     

     

     

     

     

     

     

     

    9. If two firms have the same current dividend and the same 

    expected growth rate, their stocks must sell at the same current price or else 

    the market will not be in equilibrium. (Points : 1)

     

           

    False, because the required return could be 

    different

          

    True, because we are using a dividend valuation 

    model

          

    True if markets are semi-strong form 

    efficient

          

    True if investors are 

    risk-averse

     

     

     

     

     

     

     

     

     

    10. Butler Corp paid a dividend today of $5 per share. The 

    dividend is expected to grow at a constant rate of 6.5% per year. If Butler Corp 

    stock is selling for $50.00 per share, the stockholders’ expected rate of return 

    is (Points : 1)

     

           

    11.50%.

          

    13.56%.

          

    15.49%.

     

    16.50%.

      • class=css-1j18aoo8 years ago

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      • BUS 401 Week 2 Finance MCQ

        NOT RATED

        1. Preferred stock is similar to a bond in the following
        way (Points : 1)

        preferred stock always contains a maturity
        date.

        class=css-1j18aoo7 years ago

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