Share Valuation MCQs (1-10)

1. Shares and bonds are float in ……………?

(a) Money market

(b) Capital market

(c) Commercial bank

(d) Equity market

Correct! Wrong!

2. The dividend discount model?

(a) Ignores capital gains

(b) Incorporates the after-tax value of capital gains

(c) Includes capital gains implicitly

(d) Restricts capital gains to a minimum

Correct! Wrong!

3. Stock that have priority of claim on assets?

(a) Common stock

(b) Preferred stock

(c) Share

(d) DDM

Correct! Wrong!

4. The dividend growth rate is referred to as the?

(a) Dividend yield

(b) Discount rate

(c) Market rate

(d) Capital gains yield

Correct! Wrong!

5. Who determine the market price of a share of common stock?

(a) The board of directors of the firm

(b) The stock exchange on which the stock is listed

(c) The president of the company

(d) Market forces buying and selling of the stock

Correct! Wrong!

6. The firm of Sun and Moon purchased a share of ABC.com common stock exactly one year ago for Rs. 45. During the past year the common stock paid an annual dividend of Rs. 2.40. The firm sold the security today for Rs. 85. What is the rate of return the firm has earned?

(a) 5.3%

(b) 194.2%

(c) 94.2%

(d) None

Correct! Wrong!

7. A preferred stock will pay a dividend of Rs. 3.00 in the upcoming year, and every year thereafter, for three year. You require a return of 9% on this stock. Use the constant growth model to calculate the intrinsic value of this preferred stock?

(a) Rs. 33.33

(b) Rs. 10.27

(c) Rs. 31.82

(d) Rs. 7.59

Correct! Wrong!

8. What is difference between shares and bonds?

(a) Bonds represent ownership whereas shares do not

(b) Shares represent ownership whereas bonds do not

(c) Shares and bonds both represent equity

(d) Shares and bond both represent liabilities

Correct! Wrong!

9. The ______ is defined as the present value of all cash proceeds to the investor in the stock?

(a) Intrinsic value

(b) Dividend payout ratio

(c) Market capitalization rate

(d) Plowback ratio

Correct! Wrong!

10. You wish to earn a return of 13% on each of two stocks, X and Y. Stock X is expected to pay a dividend of Rs. 3 in the upcoming year while Stock Y is expected to pay a dividend of Rs. 4 in the upcoming year. The expected growth rate of dividends for both stocks is 7%. The intrinsic value of stock X?

(a) Will be greater than the intrinsic value of stock Y

(b) Will be the same as the intrinsic value of stock Y

(c) Will be less than the intrinsic value of stock Y

(d) Cannot be calculated without knowing the market rate of return

Correct! Wrong!

1. Shares and bonds are float in ……………?

2. The dividend discount model?

3. Stock that have priority of claim on assets?

4. The dividend growth rate is referred to as the?

5. Who determine the market price of a share of common stock?

6. The firm of Sun and Moon purchased a share of ABC.com common stock exactly one year ago for Rs. 45. During the past year the common stock paid an annual dividend of Rs. 2.40. The firm sold the security today for Rs. 85. What is the rate of return the firm has earned?

7. A preferred stock will pay a dividend of Rs. 3.00 in the upcoming year, and every year thereafter, for three year. You require a return of 9% on this stock. Use the constant growth model to calculate the intrinsic value of this preferred stock?

8. What is difference between shares and bonds?

9. The ______ is defined as the present value of all cash proceeds to the investor in the stock?

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