Finance Exam 1 |Chapters 1,2,3,4,&5 homework Pearson Question

Finance Exam 1 |Chapters 1,2,3,4,&5 homework
Pearson Questions
Which of the following are reasons that make valuing a share of stock more difficult than
valuing a bond? ** Answ** -Dividends are unknown and uncertain
-The required rate of return is unobservable
-Stock has no set maturity

P0 = (D1 + P1)/(1 + __) ** Answ** R

Match the following terms relating to stock valuation:
P1
D1
R
P0
D0 ** Answ** -Price in one year
-Next expected dividend
-Discount Rate
-Price today
-Dividend just paid

Which one of the following is true about dividend growth patterns? ** Answ**
Dividends may grow at a constant rate.

What information do we need to determine the value of a stock using the zero growth
model? ** Answ** -Dividend
-Discount rate

True or false: Common stock has a set maturity. ** Answ** False

P1 = (__ + P2)/(1 + R) ** Answ** D2 (little 2)

The price of a share of common stock is equal to the present value of all ______ future
dividends. ** Answ** Expected

The constant-growth model assumes that _________. ** Answ** dividends change
at a constant rate

Three special case patterns of dividend growth discussed in the text include: **
Answ** -non-constant growth
-constant growth
-zero growth

Which of the following represents the valuation of stock using a zero growth model? **
Answ** Dividend/Discount rate = D/R