A) Each stock's expected return should equal its realized return as seen by the marginal investor.
B) Each stock's expected return should equal its required return as seen by the marginal investor.
C) All stocks should have the same expected return as seen by the marginal investor.
D) The expected and required returns on stocks and bonds should be equal.
E) All stocks should have the same realized return during the coming year.
G) None of the above
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A) 6.01%
B) 6.17%
C) 6.33%
D) 6.49%
E) 6.65%
G) D) and E)
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A) 11.84%
B) 12.21%
C) 12.58%
D) 12.97%
E) 13.36%
G) C) and D)
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B) False
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A) $28.90
B) $29.62
C) $30.36
D) $31.12
E) $31.90
G) B) and C)
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A) Stock X has a higher dividend yield than Stock Y.
B) Stock Y has a higher dividend yield than Stock X.
C) One year from now, Stock X's price is expected to be higher than Stock Y's price.
D) Stock X has the higher expected year-end dividend.
E) Stock Y has a higher capital gains yield.
G) C) and E)
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A) increase.
B) decrease.
C) fluctuate less than before.
D) fluctuate more than before.
E) possibly increase, possibly decrease, or possibly remain constant.
G) C) and D)
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A) 7.54%
B) 7.73%
C) 7.93%
D) 8.13%
E) 8.34%
G) C) and E)
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A) $0.95
B) $1.05
C) $1.16
D) $1.27
E) $1.40
G) A) and E)
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B) False
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A) Stock A's expected dividend at t = 1 is only half that of Stock B.
B) Stock A has a higher dividend yield than Stock B.
C) Currently the two stocks have the same price, but over time Stock B's price will pass that of A.
D) Since Stock A's growth rate is twice that of Stock B, Stock A's future dividends will always be twice as high as Stock B's.
E) The two stocks should not sell at the same price.If their prices are equal, then a disequilibrium must exist.
G) A) and C)
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B) False
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A) the expected future return must be less than the most recent past realized return.
B) The past realized return must be equal to the expected return during the same period.
C) the required return must equal the realized return in all periods.
D) the expected return must be equal to both the required future return and the past realized return.
E) the expected future returns must be equal to the required return.
G) C) and E)
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A) $37.86
B) $38.83
C) $39.83
D) $40.85
E) $41.69
G) C) and E)
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A) Stock Y pays a higher dividend per share than Stock X.
B) Stock X pays a higher dividend per share than Stock Y.
C) One year from now, Stock X should have the higher price.
D) Stock Y has a lower expected growth rate than Stock X.
E) Stock Y has the higher expected capital gains yield.
G) A) and E)
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A) $40.17
B) $41.20
C) $42.26
D) $43.34
E) $44.46
G) B) and C)
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A) $18.62
B) $19.08
C) $19.56
D) $20.05
E) $20.55
G) A) and B)
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A) the stock is experiencing supernormal growth.
B) the stock should be sold.
C) the stock is a good buy.
D) management is probably not trying to maximize the price per share.
E) dividends are not likely to be declared.
G) B) and D)
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A) A major disadvantage of financing with preferred stock is that preferred stockholders typically have supernormal voting rights.
B) Preferred stock is normally expected to provide steadier, more reliable income to investors than the same firm's common stock, and, as a result, the expected after-tax yield on the preferred is lower than the after-tax expected return on the common stock.
C) The preemptive right is a provision in all corporate charters that gives preferred stockholders the right to purchase (on a pro rata basis) new issues of preferred stock.
D) One of the disadvantages to a corporation of owning preferred stock is that 70% of the dividends received represent taxable income to the corporate recipient, whereas interest income earned on bonds would be tax free.
E) One of the advantages to financing with preferred stock is that 70% of the dividends paid out are tax deductible to the issuer.
G) B) and C)
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A) If a company has two classes of common stock, Class A and Class B, the stocks may pay different dividends, but under all state charters the two classes must have the same voting rights.
B) The preemptive right gives stockholders the right to approve or disapprove of a merger between their company and some other company.
C) The preemptive right is a provision in the corporate charter that gives common stockholders the right to purchase (on a pro rata basis) new issues of the firm's common stock.
D) The stock valuation model, P0 = D1/(rs - g) , cannot be used for firms that have negative growth rates.
E) The stock valuation model, P0 = D1/(rs - g) , can be used only for firms whose growth rates exceed their required returns.
G) A) and B)
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