1. A preferred stock pays a dividend of $3.50 in perpetuity. If the return required by shareholders is 11%, then the price per share for this preferred stock is?

1.

A preferred stock pays a dividend of $3.50 in perpetuity. If the return required by shareholders is 11%, then the price per share for this preferred stock is

$35.08.

$31.82.

$38.50.

$41.21.

none of the above

2.

If a company called Fin201 Inc. went out of business and was liquidated, which of the following is the correct order that the following stakeholders and owners would be paid? (paid first, paid second, paid third)

common stock, debt holders, preferred stock

TAs, Professor Cardell, students, bugs, dirt

preferred stock, debt holders, common stock

debt holders, preferred stock, common stock

3.

If a company skips a dividend payment to preferred shareholders, then the company

must pay the dividend to common shareholders.

must repurchase shares from both common and preferred shareholders.

cannot pay any dividends to common shareholders until the preferred dividend is paid.

all of the above

none of the above

4.

A firm just issued new shares of preferred stock that will pay a dividend of $4.60. If the return required by shareholders is 10%, then the price of the preferred stock is

$5.06.

$0.46.

$74.54.

$460.00.

$46.00.

5.

Which of the following securities is considered a hybrid security?

common stock

preferred stock

bond

annuity

none of the above

6.

Some Co. is planning to pay a dividend of $5.60 in the next year and expects to grow the dividend at a constant rate of 4% per year, indefinitely. If the required rate of return by shareholders is 13%, then the price of this stock should be

$43.10.

$52.66.

$63.72.

$67.10.

none of the above

7.

Which of the following securities represents ownership in the firm?

annuity

bond

preferred stock

all of the above

none of the above

8.

Which of the following statements correctly defines the difference between preferred stock and common stock?

Preferred shareholders have more of a claim to dividends than common stockholders.

Preferred shareholders do not have the voting rights that common stockholders have.

Common shareholders have more exposure to variable share prices than preferred shareholders.

all of the above

none of the above

9.

Stockholders have a ________ claim on firm earnings and assets.

fixed

guaranteed

residual

contracted

10.

Which of the following is not a characteristic of common stock?

has the lowest priority to claim the asset in case of bankruptcy

has voting rights

pays fixed dividends

has no maturity