Select one way that common stock differs from preferred stock.

• a.)
• Common stock may be converted to preferred stock if the holder so chooses.
• b.)
• Common stock represents ownership in a company, whereas preferred stock does not.
• c.)
• In the case of bankruptcy, common stockholders are only entitled to assets after preferred stockholders have been compensated.
• d.)
• Common stock is generally thought to be less risky than preferred stock.

Select the pairing that is correctly matched.

• a.)
• Common stock:holder may participate in the annual general meeting
• b.)
• Preferred stock: is a form of a loan
• c.)
• Common stock: has a callability feature
• d.)
• Preferred stock: has a defined maturity

A university that purchases a portfolio of stocks to generate returns for its long-term growth is an example of an __________.

• a.)
• issuer
• b.)
• investment trust
• c.)
• investor
• d.)
• intermediary

Determine the value of a stock with the following variables using the constant growth model:

• Current annual dividend: $1.50 per share
• Required return rate: 6.5%
• Constant growth rate: 4.5%
• a.)
• $35.50
• b.)
• $78.38
• c.)
• $79.88
• d.)
• $75