7.In the formula r = (D1/P0) + g, what does (D1/P0) represent? a. the expected price appreciation yield from a common stock. b. the expected dividend yield from a common stock. c. the dividend yield from a preferred stock. d. the interest payment from a bond. e. None of the above.
7.In the formula r = (D1/P0) + g, what does (D1/P0) represent?
a. the expected price appreciation yield from a common stock.
b. the expected dividend yield from a common stock.
c. the dividend yield from a preferred stock.
d. the interest payment from a bond.
e. None of the above.
8. According to the constant growth in dividends price formula given in the textbook, if the dividend to be paid
one year from today increases and all other factors remain constant, the price of the stock will __________;
if the growth rate of all future dividends increases and all other factors remain constant, the price of the stock
will __________; and if the required
of the stock will __________.
a. decrease; decrease; decrease
b. increase; increase; decrease
c. decrease; increase; decrease
d. increase; increase; increase
e. None of the answers listed above are correct.
9. Which of the following is correct about the
rate if the bond’s yield to maturity (YTM) is 15 percent? (There may be more than one correct answer for this
question; you must select ALL of the correct answers, but ONLY the correct answers, to receive any credit for
this question).
a. If this bond matures in one year or more, the price of the bond will be greater than $1,000.
b. If this bond matures in one year or more, the price of the bond will be less than $1,000.
c. If this bond matures in one year or more, the price of the bond will be larger if the coupon payments are
made semi-annually than if they are made annually.
d. If this bond matures in one year or more, the price of the bond will be smaller if the coupon payments are
made semi-annually than if they are made annually.
e. This bond will sell for $1,000 regardless of the time to maturity of the bond.
f. The price of this bond will be smaller if term time to maturity is 20 years than if the term to maturity is
10 years.
g. The price of this bond will be larger if term time to maturity is 20 years than if the term to maturity is 10
years
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