5. An increase in which of the following will decrease the current value of a stock according to the
constant growth model?
A. Discount rate
B. Number of future dividends, provided the total number of dividends is less than infinite
C. Dividend amount
D. Dividend growth rate
E. Both the discount rate and the dividend growth rate
6. A company has a capital structure that includes bonds, preferred stock, and common stock. Which one
of the following rights is most likely to be granted to the preferred shareholders?
A. Right to share in company profits prior to other shareholders
B. Right to elect the corporate directors
C. Right to vote on proposed mergers
D. Right to all residual income after the common dividends have been paid
E. Right to a permanent seat on the board of directors
7. ABC stock is listed on NYSE. The firm is planning to issue some new equity shares for sale to the
general public. This sale will definitely occur in which one of the following markets?
A. Private
B. Auction
C. Tertiary
D. Secondary
E. Primary
8. The calculation of expected return on a portfolio considers which of the following factors?
I. Percentage of the portfolio invested in each individual security
II. Projected states of the economy
III. The performance of each security given various economic states
IV. Probability of occurrence for each state of the economy
A. I and III only
B. II and IV only
C. I, III, and IV only
D. II, III, and IV only
E. I, II, III, and IV
