Question

23) 23) The interest earned on both the initial principal and the interest reinvested from prior periods is called: A) dual interest B) free interest C) interest on interest. D) simple interest. E) compound interest. 24) 24) Which one of the following statements is correct? A) All stocks can be valued using the dividend discount models. B) Stocks can only be assigned one dividend growth rate. C) Preferred stocks generally have variable growth rates. D) Dividend growth rates must be either zero or positive. E) Stocks can have negative growth rates. 25) You want to be on the board of directors of Uptown Communications. Since you are the 29 only shareholder who will vote for you, you will need to own more than half of the outstanding shares of stock if you are to be elected to the board. What is the type of voting called that requires this level of stock ownership to be successfully elected? A) Proxy B) Straight C) Deferred D) Cumulative E) Democratic 26) A note is generally defined as: A) a secured bond that initially matures in less than 10 years. B) any bond secured by a blanket mortgage. C) an unsecured bond with an initial maturity of 10 years or less. D) any bond maturing in 10 years or more. E) a secured bond with an initial maturity of 10 years or more. 27) A bond that is payable to whomever has physical possession of the bond is said to be i A) collateral status. B) debenture status. C) registered form. D) bearer form. E) new-issue condition.

Answer 1

Ans. 23-E Compound interest.

let us understand with an example

suppose principle amount=Rs. 100

Interestrate =10% p.a.

so, the interest for 1st year is Rs. 10 and for the 2nd year is Rs. 11 because Rs. 10 of 1st year is reinvested.

Ans. 24-D (Because dividend growth never be negative.)

Ans. 25- B straight voting also called statutory voting which is commonly used to elect the director.

Ans. 26-C A note is defined as unsecured bond with an initial maturity of 10 year on less.

Ans. 27- D- Bearer form.