1. (TCO D) Find the required return for a stock, given that the current dividend is $4.45
per share, the dividend growth rate is 6.5 percent, and the stock price is $101.00
 per share. (Points : 5)

       9.91%

       11.19%

       8.91%

       10.91%

2. (TCO D)  Find the next dividend on a stock given that the required return is 9.78 percent, the dividend growth rate is 7.77 percent, and the stock price is $94.89 per share. (Points : 5)

       $2.91

       $0.91

       $1.91

       $1.71

3. (TCO D) A company has taxable income of $1,760 with a tax rate of 38 percent. Owners equity is:  $400 in stock, $200 in capital surplus, and $200 in retained earnings. What is the return on equity (ROE)? (Points : 5)

       130%

       125%

       123%

       136%

4. (TCO B) Jaffee found that stock prices __________ after insiders intensively bought shares and __________ after insiders intensively sold shares. (Points : 5)

       decreased, decreased

       decreased, increased

       increased, decreased

       increased, increased

5. (TCO B) The ratio of the average yield on 10 top-rated corporate bonds, to the average yield on 10 intermediate-grade bonds is called the __________. (Points : 5)

       bond price index

       confidence index

       relative strength index

       trin ratio

6. (TCO A) ____ is not a derivative security. (Points : 5)

       A share of common stock

       A call option

       A futures contract

       All of the above are derivative securities.

7. (TCO  A)   Barnegat Light sold 200,000 shares in an initial public offering. The underwriter's explicit fees were $90,000. The offering price for the shares was $35, but immediately upon issue, the share price jumped to $43. What is the best estimate of the total cost to Barnegat Light concerning the equity issue? (Points : 5)

       $90,000

       $1,290,000

       $2,390,000

       $1,690,000

8. (TCO A) You earn six percent on your corporate bond portfolio this year, and you are in a 25 percent federal tax bracket and an eight percent state tax bracket. Your after tax return is _____. (Assume that federal taxes are not deductible against state taxes and vice versa). (Points : 5)

       4.50%

       4.14%

       4.02%

       3.12%

9.

TCO I)  CAPM is one of the more popular models for determining the risk premium on a stock.  What is  the expected market return given an expected return on a security of 15.8%, a stock beta of 1.2, and a risk free interest rate of 5.0%?  Find the Expected Market Return.  Show  your work.

(Points : 34)

10. (TCO D) XYZ company paid a dividend of $1.25 during the past 12 months. The expected growth rate is 7 percent, and the required rate of return is 9.5 precent based on the cost of capital. Calculate the current price of the stock. Do not use a financial calculator or an online calculator. You must show your work. (Points : 34)

11. (TCO D) Company XYZ is expected to grow at 15% annually forever, and its dividend in the next 12 months is expected to be $1.50, and its required rate of return is 19.5%.

a. What is its intrinsic value?

b. If the current price is equal to its intrinsic value, what is next year's expected price?

c. Assume you buy the stock now and sell it after receiving the $1.50 dividend one year from now. What would be your anticipated capital gain in percentage terms?

What is the dividend yield and the holding period return?

(Points : 34)

12. (TCO E)  In technical analysis there are multiple indicators of market movement. The three most widely known are Breadth of the Market, Advance/Decline indicator, and the Advance/Decline Line. Provide a brief explanation of what each indicator tells us. (Points : 34)

13. (TCO B) There are four components in a business cycle. Identify each component and provide a brief explanation of what occurs in each cycle. (Points : 34)