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FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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
Transcribed Image Text:The term short selling is the
O Selling of a security that was purchased by borrowing money from a broker
O Selling of a security that is not owned by the seller.
O Selling of all the shares -you own in a company in anticipation that the price will decline dramatically
O Betting that a stock will increase by a certain amount within a given period of time.
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- Suppose instead of paying a dividend, Payout Corp. announces that it will repurchase stockwith a market value of $10,000. What happens to the stock price when the repurchaseproposal is announced? subpart d needs to be solvedarrow_forwardWhich of the following is TRUE? a. A bull market is where stocks, on average, are expected to go up in the near future. b. A bull market is the primary market where IPO's are introduced. c. A bull market is a situation where the price of stock in that market has been rising over a fairly long period of time d. A bull market is a market where there are more buyers than sellers, there have been more purchases of stock than sales of stock and a lot of stock is traded every day.arrow_forwardCoupon payments are fixed, but the percentage return that investors receive varies based on market conditions. This percentage return is referred to as the bond's yield. Yield to maturity (YTM) is the rate of return expected from a bond held until its maturity date. However, the YTM equals the expected rate of return under certain assumptions. Which of the following is one of those assumptions? The probability of default is zero. The bond is callable. Consider the case of Badger Corp.: Badger Corp. has 9% annual coupon bonds that are callable and have 18 years left until maturity. The bonds have a par value of $1,000, and their current market price is $1,190.35. However, Badger Corp. may call the bonds in eight years at a call price of $1,060. What are the YTM and the yield to call (YTC) on Badger Corp.'s bonds? Value YTM YTCarrow_forward
- It is usually possible to reduce the risk of investing in the stock market by buying a wide range of stockS*A. TrueB. Falsearrow_forward"The dividend discount model is used to find the price of a stock based on the expected dividends received by the shareholder and the discount rate. Therefore, all else constant, the price of a share of stock will increase if the discount rate decreases." A) True B) Falsearrow_forwardIt is usually possible to reduce the risk of investing in the stock market by buying a wide range of stockS *A. TrueB. Falsearrow_forward
- If the intrinsic value of a stock is below the current market price, over time we can expect buy orders to exceed sell orders, causing the price to rise buy and sell orders to be evenly matched, keeping the price at its current level sell orders to exceed buy orders, causing the price to rise sell orders to exceed buy orders, causing the price to fall buy orders to exceed sell orders, causing the price to fallarrow_forwardWhich statement is false? O A. As the term of a bond approaches zero, the price approaches kar. O B. For corporate and government bonds, the coupon payments amortize the princi OC. Overall, bond prices are less volatile than stock prices. O D. The coupon on a bond is expressed as a percentage of face value. O E. Corporate bonds can be bought and sold in the secondary market. Reset Selectionarrow_forwardAs the price of a bond □ a. rises; rises Ob. falls; falls c. rises; falls O d. falls; rises and the expected return , bonds become more attractive to investors and the quantity demanded rises.arrow_forward
- Which of the following is a reason why an investor would place a stop buy order on a stock? To ensure a short position is closed out for profit To ensure that the broker executes immediately at the current market price To ensure the stock is sold before its price falls to a specified level To ensure the stock is purchased when its price is risingarrow_forwardАВС XYZ Discount rate (r) Historical growth rate of 0.015+2*0.085=0.185 0.015+1.5*0.085=0.142 (58/30)^(1/30)-1=0.022 Not available. Cannot dividends compute without dividends Sustainable growth rate Fundamental value using dividend growth model with the historical growth rate Fundamental value using the 467*(1+0.185)/(0.185-0.045) dividend growth model with =3953 the sustainable growth rate Fundamental value using residual income growth 0.15*(1-0.7)=0.045 467*(1+0.185)/(0.185-0.022) 0.2*(1-0)=0.2 Not available. Cannot =3395 compute without dividends Not available. Cannot compute without dividends 80*(1+0.022)-(550*0.022)/(0. 185-0.022)=427.36 Not available. Cannot compute without dividends model with the historical growth rate Fundamental value using the 80*(1+0.045)-(550*0.045)/(0. residual income growth 12*(1+0.2)-(100*0.2)/(0.142- 0.2)=96.5 185-0.045)=420.35 model with the sustainable growth ratearrow_forwardWhen a company participates in a stock buyback program, it means that the company is buying shares of its own stock and taking them off the market. With this simple definition in mind, how would a company's stock buyback program affect its Earnings per Share?arrow_forward
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