Preferred stock ________. A) reflects residual ownership of a company B) represents a preferential claim on dividends C) will be “paid” before the bondholders D) always has a legal and specific claim to a fixed amount (listed as a liability) ANSWER Answer: B Explanation: B) COMMON STOCK reflects residual ownership of a company. […]
If the current price of Thaler-Made Furniture is $25 per share and next year’s dividend is expected to be $1.75 per share, what is the required return if dividends are expected to grow 5% per year? A) 24% B) 12% C) 32% D) 14% E) 2% ANSWER B
Determine the effective annualized cost of forgoing the trade discount on terms 1/20 net 45. A) 20.69% B) 16.780% C) 14.55% D) 15.24% ANSWER C
The holder of preferred stock is entitled to a constant dividend ________. A) every period B) only when earnings are positive C) only when the stock price increases D) only when earnings are positive and only when the stock price increases ANSWER Answer: A
Which of the following statements is TRUE? A) Preferred stock usually has a stated or par value and, like bonds, this par value is not repaid at maturity because preferred stocks do not have a maturity date. B) The par value for preferred stock, unlike bonds, is never paid back. C) A preferred stock’s cash […]
The equilibrium expected return on an asset is 14%, the risk-free rate is 4% and the return on the market portfolio is 12%. What is the beta of the asset? A) 1.10 B) 1.15 C) 1.20 D) 1.25 E) 1.30 ANSWER D
You just took out a $12,000 loan for your small business. The loan has a four year term and repayment is in the form of four equal end-of-year payments. The interest rate on the loan is 11.5%. What is your total interest expense in the first year of the loan? A) $1,380.00 B) $1,089.13 C) […]
The last dividend paid on Minsky Corp. stock was $3 per share. If Minsky investors require a 10% return, what should the share price be if the dividend payments are not expected to change? A) $3 B) $300 C) $33 D) $30 E) $40 ANSWER D
The table below shows selected financial data for the Turtle Income fund, the Hare Growth fund, the market portfolio and the risk free asset. If you wanted to build a portfolio out of T-Bills and the market portfolio to mimic the performance of the Turtle Income Fund, what proportion would you invest in the market […]
Caldwell Corp. has outstanding borrowings. One of these borrowings is nonconvertible preferred stock (cumulative) with a par value of $75 and an annual dividend rate of 8.25%. This preferred stock is currently selling for $56.46 per share. What is the yield or return (r) on this preferred stock? A) 10.395% B) 10.432% C) 10.959% D) […]
