Question

29. Future Motors is expected to pay a $3.30 a share annual dividend next year. Dividends are expected to increase by 2.75 percent annually. What is one share of this stock worth to you today if your required rate of return is 15 percent?

A. $24.56

B. $25.06

C. $26.60

D. $26.9430.

30. You cannot attend the shareholder's meeting for AlphaUnited so you authorize another shareholder to vote on your behalf. What is the granting of this authority called?

A. Alternative voting.

B. Cumulative voting

.C. Straight voting

.D. Voting by proxy.

31. Three Corners Markets paid an annual dividend of $1.37 a share last month. Today, the company announced that future dividends will be increasing by 2.8 percent annually. If you require a return of 11.6 percent, how much are you willing to pay to purchase one share of this stock today?

A. $15.56

B. $16.00

C. $16.67

D. $17.68

32. A______ arranges a transaction between a buyer and a seller of equity securities but does not maintain an inventory, whereas a ______maintains an inventory from which he or she buys and sells securities.

A. dealer, broker

B. broker, dealer

C. capitalist, dealer

D. broker, capitalist

33. The XYZ Co. just paid a dividend of $1.95 per share on its stock. The dividends are expected to grow at a constant rate of 4% per year indefinitely. Assume investors require a return of 10.5 % on the XYZ Co. stock. What will the price be in 3 years?

A.$ 30.00

B.$ 31.20

C.$ 35.10

D.$ 56.19

Answer 1

29. Price = Div1/(r - g)

Price = 3.30/(0.15 - 0.0275)

Price = 3.30/0.1225

Price = 26.9387755102

Price = $26.9430

30. The correct answer is option D. Proxy voting

The granting of voting authority to someone else is called Proxy voting.

Option A is incorrect because alternative voting is called preferential voting, not proxy voting.

Option B is incorrect because, in the cumulative voting system, all the votes can be given to a single candidate.

Option C is incorrect because one vote per share is referred to as the straight voting.

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