1. Jason bought 30,000 shares of CTB Inc. on January 12, 2013. At that time, CTB Inc. had 2 million common shares outstanding. Calculate the portion of CTB Inc. that Jason owns.
a. 2.3 percent
b. 1.4 percent
c. 6.0 percent
d. 1.5 percent

2. You bought 100 shares at $20 each. At the end of the year, you received a total of $400 in dividends, and your stock was worth $2,500 total. What was your total return?
a. 45 percent
b. 50 percent
c. 90 percent
d. 25 percent

3. Which of the following is not a difference between equity securities and debt securities?
a. Incur a tax-deductible expense
b. Have a fixed maturity date
c. Always involve fixed periodic payments

4. Given that the government short-term T-bill yield is 4 percent, and the risk premium of
Takashi Group is 6.5 percent, calculate Takashi Group’s required rate of return.
a. 8.5 percent
b. 10.5 percent
c. 7.25 percent
d. 11.5 percent

5. Which of the following statements about equities is correct?
a. Every firm pays dividends to common shareholders each year.
b. Preferred dividends are usually paid annually in practice.
c. Common shareholders are entitled to a firm’s earnings before preferred shareholders.
d. Common shareholders can vote on issues, such as mergers, election of board members, and so on.

6. Westlake Ltd. just paid a dividend of $2.00 per share, which is expected to grow at a constant rate of 4.5 percent indefinitely. The T-bill rate is 3 percent and the risk premium of Westlake Ltd. is 6.5 percent. Calculate Westlake's current share price.
a. $42.60
b. $41.80
c. $46.05
d. $40.00

7. Grace Holdings recently paid an annual dividend of $1.50 per share, and its estimated long-term growth rate in dividends is 4 percent. The current market price of each share is $26. The implied rate of return on the share is
a. 9.77 percent.
b. 10 percent.
c. 12.5 percent.
d. 13.33 percent.

  • CreatedFebruary 25, 2015
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