Finance Conceptual Chapter 8

1. An asset characterized by cash flows that increase at a constant rate forever is called a:

a. growing perpetuity.

2. The stock valuation model that determines the current stock price by dividing the next annual dividend amount by the excess of the discount rate less the dividend growth rate is called the ____ model.

b. dividend growth.

3. Next year’s annual dividend divided by the current stock price is called the:

c. dividend yield.

4. The rate at which a stock’s price is expected to appreciate (or depreciate) is called the ____ yield.

d. capital gains.

5. A form of equity which receives preferential treatment in the payment of dividends is called ____ stock.

d. preferred.

6. A form of equity which receives no preferential treatment in either the payment of dividends or in bankruptcy distributions is called ____ stock.

e. common.

7. The voting procedure whereby shareholders may cast all of their votes for one member of the board is called ____ voting.

b. cumulative.

8. The voting procedure where you must own 50 percent plus one of the outstanding shares of stock to guarantee that you will win a seat on the board of directors is called ____ voting.

c. straight.

9. Payments made by a corporation to its shareholders, in the form of either cash, stock or payments in kind, are called:

c. dividends.

10. The market in which new securities are originally sold to investors is called the ____ market.

e. primary.

11. The market in which previously issued securities are traded among investors is called the ____ market.

d. secondary.

12. An agent who buys and sells securities from inventory is called a:

e. dealer.

13. A member of the New York Stock Exchange acting as a dealer in one or more securities on the exchange floor is called a:

c. specialist.

14. A member of the New York Stock Exchange who executes orders for commission brokers on a fee basis is a:

d. floor broker.

15. A member of the New York Stock Exchange who trades for his or her own account, trying to anticipate temporary price fluctuations, is called a(n):

a. floor trader.

16. A securities market primarily comprised of dealers who buy and sell for their own inventories is generally referred to as a(n) ____ market.

c. over-the-counter.