Wall Street Exam Questions And Answers
(Guaranteed A+)
Last year, T-bills returned 2% while your investment in large-company stocks earned an average
of 5%. which one of the following terms refers to the difference between these two rates of
return? - answer✔Risk Premium
Standard deviation is a measure of which one of the following? - answer✔Volatility
Assume that the market prices of the securities that trade in a particular market fairly reflect
the available information related to those securities. Which one of the following terms best
defines that market? - answer✔Efficient capital market
Stacy purchased a stock last year and sold it today for $3 a share more than her purchase price.
She received total of $0.75 in dividends. Which one of the following statements is correct in
relation to this investment? - answer✔The capital gains yield is positive
Efficient financial markets fluctuate continuously because: - answer✔The markets are
continually reacting to new information
Individuals who continually monitor the financial markets seeking mispriced securities: -
answer✔make the markets increasingly more efficient
What is the model called that determines the present value of a stock based on its next annual
dividend, the dividend growth rate, and applicable discount rate? - answer✔Dividend growth
Which one of the following is the rate at which a stock's price is expected to appreciate? -
answer✔Capital gains yield
You cannot attend the shareholder's meeting for Alpha United so you authorize another
shareholder to vote on your behalf. What is the granting of this authority called? -
answer✔Voting by proxy
An agent who maintains an inventory from which he or she buys and sells securities is called a: -
answer✔Dealer
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National Trucking has paid an annual dividend of $1.00 per share on its common stock for the
past fifteen years and is expected to continue paying a dollar a share long into the future. Given
this, on share of the firm's stock is: - answer✔Priced the same as $1 perpetuity.
The dividend growth model:
I. assumes that dividend increase at a constant rate forever.
II. can be used to compute a stock price at any point in time.
III. can be used to value zero-growth stocks.
IV. requires the growth rate to be less than the required return. - answer✔I, II, III, and IV
An increase in which of the following will increase the current value of a stock according to the
dividend growth model?
I. dividend amount
II. number of future dividends, provided the current number is less than infinite.
III. discount rate.
IV. dividend growth rate. - answer✔I, II, and IV only
which one of the following is an underlying assumption of the dividend growth model? -
answer✔A stock's value is equal to the discounted present value of the future cash flows which
it generates.
Answer this question based on the dividend growth model. If you expect the market rate of
return to increase across the board on all equity securities, then you should also expect: -
answer✔A decrease in all stock values.
Which one of the following statements related to corporate dividends is correct? -
answer✔Corporate shareholders may receive a tax break on a portion of their dividend income.
Hedging involves: - answer✔Taking a futures position opposite to one's crash market position.
If you have a long cash position and do not hedge it, you are: - answer✔Speculator, in a
position to profit from an increase in price, subject to a loss if prices decline.
A farmer has soybeans in storage to sell in May. They sold May soybean futures in order to
minimize price risk. The positions in the Cash and Futures Markets are: - answer✔Long in the
Cash Market and Short in the Future Market.
Leverage in futures contracts produces: - answer✔High gains or high losses
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