What is the model called that determines the present value of a stock based on its next annual

dividend, the dividend growth rate, and the applicable discount rate? 
A. zero growth
B. dividend growth
C. capital pricing
D. earnings capitalization
E. discounted dividend

Which one of following is the rate at which a stock's price is expected to appreciate? 
A. current yield
B. total return
C. dividend yield
D. capital gains yield
E. coupon rate

Which one of the following types of stock is defined by the fact that it receives no preferential
treatment in respect to either dividends or bankruptcy proceedings? 
A. dual class
B. cumulative
C. non-cumulative
D. preferred
E. common

What are the distributions to shareholders by a corporation called? 

A. retained earnings
B. net income
C. dividends
D. capital payments
E. diluted profits

Which one of the following is a type of equity security that has a fixed dividend and a priority
status over other equity securities? 
A. senior bond
B. debenture
C. warrant
D. common stock
E. preferred stock

Miller Brothers Hardware paid an annual dividend of $1.15 (D0) per share last month. Today, the
company announced that future dividends will be increasing by 2.6 percent annually. If you
require a 12 percent rate of return, how much are you willing to pay (P0) to purchase one share of
this stock today? 
 D0 ×(1+ G)
P 0=
R−G

An ordinary annuity is best defined by which one of the following? 

A. increasing payments paid for a definitive period of time
B. increasing payments paid forever
C. equal payments paid at regular intervals over a stated time period
D. equal payments paid at regular intervals of time on an ongoing basis
E. unequal payments that occur at set intervals for a limited period of time

Which one of the following accurately defines a perpetuity?

A. a limited number of equal payments paid in even time increments
B. payments of equal amounts that are paid irregularly but indefinitely
C. varying amounts that are paid at even intervals forever
D. unending equal payments paid at equal time intervals
E. unending equal payments paid at either equal or unequal time intervals

A loan where the borrower receives money today and repays a single lump sum on a future date
is called a(n) _____ loan. 
A. amortized
B. continuous
C. balloon
D. pure discount
E. interest-only
You are comparing two investment options that each pay 5 percent interest, compounded
annually. Both options will provide you with $12,000 of income. Option A pays three annual
payments starting with $2,000 the first year followed by two annual payments of $5,000 each.
Option B pays three annual payments of $4,000 each. Which one of the following statements is
correct given these two investment options? 

A. Both options are of equal value given that they both provide $12,000 of income.
B. Option A has the higher future value at the end of year three.
C. Option B has a higher present value at time zero than does option A.
D. Option B is a perpetuity.
E. Option A is an annuity.

What is the model called that determines the present value of a stock based on its next annual
dividend, the dividend growth rate, and the applicable discount rate?
A. zero growth
B. dividend growth
C. capital pricing
D. earnings capitalization
E. discounted dividend
Which one of the following statements related to annuities and perpetuities is correct? 
A. An ordinary annuity is worth more than an annuity due given equal annual cash flows for ten
years at 7 percent interest, compounded annually.
B. A perpetuity comprised of $100 monthly payments is worth more than an annuity comprised
of $100 monthly payments, given an interest rate of 12 percent, compounded monthly.
C. Most loans are a form of a perpetuity.
D. The present value of a perpetuity cannot be computed, but the future value can.
E. Perpetuities are finite but annuities are not.

Your grandmother is gifting you $100 (C) a month (F) for four years (T) while you attend
college to earn your bachelor's degree. At a 5.5 percent discount rate (i), what is the present value
of this annuity (APV) on the day you enter college? 

[ ] [ ]
1
1-
(1+i/F )TF
APV = C×
i
F