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Corporate Finance Homework 7

10 Questions
Corporate Finance Quizzes & Trivia

These are the homework questions for Chapter 7 in Corporate Finance.

Questions and Answers
  • 1. 
    What is the name given to the model that computes the present value of a stock by dividing next year's annual dividend amount by the difference between the discount rate and the rate of change in the annual dividend amount?
    • A. 

      Stock pricing model

    • B. 

      Equity pricing model

    • C. 

      Capital gain model

    • D. 

      Dividend growth model

    • E. 

      Present value model

  • 2. 
    Which one of the following types of securities has no priority in a bankruptcy proceeding?
    • A. 

      Convertible bond

    • B. 

      Senior debt

    • C. 

      Common stock

    • D. 

      Preferred stock

    • E. 

      Straight bond

  • 3. 
    Kate could not attend the last shareholders meeting and thus she granted the authority to vote on her behalf to the managers of the firm. Which one of the following terms is used to describe the method by which Kate's shares were voted?
    • A. 

      Straight

    • B. 

      Cumulative

    • C. 

      Consent-form

    • D. 

      Proxy

    • E. 

      In absentia

  • 4. 
    Dividends are best defined as:
    • A. 

      Cash payments to shareholders.

    • B. 

      Cash payments to either bondholders or shareholders.

    • C. 

      Cash or stock payments to shareholders.

    • D. 

      Cash or stock payments to either bondholders or shareholders.

    • E. 

      Distributions of stock to current shareholders.

  • 5. 
    Newly issued securities are sold to investors in which one of the following markets?
    • A. 

      Proxy

    • B. 

      Stated value

    • C. 

      Inside

    • D. 

      Secondary

    • E. 

      Primary

  • 6. 
    What is the market called that allows shareholders to resell their shares to other investors?
    • A. 

      Primary

    • B. 

      Proxy

    • C. 

      Secondary

    • D. 

      Inside

    • E. 

      Initial

  • 7. 
    An agent who buys and sells securities from inventory is called a:
    • A. 

      Floor trader.

    • B. 

      Dealer.

    • C. 

      Commission broker.

    • D. 

      Broker.

    • E. 

      Floor broker.

  • 8. 
    A broker is an agent who:
    • A. 

      Trades on the floor of an exchange for himself or herself.

    • B. 

      Buys and sells from inventory.

    • C. 

      Offers new securities for sale to dealers only.

    • D. 

      Who is ready to buy or sell at any time.

    • E. 

      Brings buyers and sellers together.

  • 9. 
    The dividend yield is defined as:
    • A. 

      The current annual cash dividend divided by the current market price per share.

    • B. 

      The current annual cash dividend divided by the current book value per share.

    • C. 

      Next year's expected cash dividend divided by the current market price per share.

    • D. 

      Next year's expected cash dividend divided by the current book value per share.

    • E. 

      Next year's expected cash dividend divided by next year's expected market price per share.

  • 10. 
    The capital gains yield equals which one of the following?
    • A. 

      Total yield

    • B. 

      Current discount rate

    • C. 

      Market rate of return

    • D. 

      Dividend yield

    • E. 

      Dividend growth rate