MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Because common shareholders are entitled to the profits that remain after all of a corporation's 1) _______
other obligations have been met, common shareholders are known as A) debt owners.
B) temporary owners.
C) owners of last resort.
D) residual owners.
2) An individual who invested $100,000 in average stocks early in the year 2000 would have approximately how much money at the end of 2008?
3) Over the long run, stocks have provided investors with annual returns of around A) 12% to 14%.
B) 6% to 8%.
C) 10% to 12%.
D) 8% to 10%.
4) If stocks earn an average rate of return of 12 %, their value doubles every A) 8 years.
B) 6 years.
C) 4 years.
D) 12 years.
5) Which one of the following statements about common stock is true? A) Common stocks generally have a negative rate of return over a ten-year period. B) Dividends generally provide the greatest rate of return on common stocks. C) The DJIA is the best indicator of the overall performance of common stocks. D) Common stock can provide attractive capital appreciation opportunities.
6) When a company, working with an underwriter, offers the investing public a certain number of shares of its stock at a certain price, the company is making what is known as a A) stock spin-off.
B) public offering.
C) rights offering.
D) treasury offering.
7) In a rights offering, the
A) total equity remains constant while the number of shares of common stock outstanding increases.
B) amount of debt in the capital structure increases by the amount of the rights offering. C) existing stockholders are given the first opportunity to purchase new shares in proportion to their current ownership position.
D) underwriter offers the investing public a certain number of shares at a certain price.
8) Rob owns 300 shares of Blackwood common stock valued at $9 a share. Blackwood has declared a 3-for-1 stock split effective tomorrow. After the split, Rob will own A) 100 shares valued at about $27 a share.
B) 900 shares valued at about $27 a share.
C) 900 shares valued at about $3 a share.
D) 100 shares valued at about $3 a share.
9) Engines, Inc. declares a 2-for-5 stock split. The stock currently sells for $3 a share. A shareholder who owned 100 shares of stock prior to the split will now own A) 250 shares valued at about $1.20 a share.
B) 250 shares valued at about $7.50 a share.
C) 40 shares valued at about $1.20 a share.
D) 40 shares valued at about $7.50 a share.
10) When a corporation declares a stock split, it usually does so because A) there are too many shares of stock outstanding.
B) investors sometimes require nontaxable returns.
C) the firm's retained earnings are excessive.
D) the stock price is too high.
11) Stock which has been issued and subsequently reacquired by the issuing corporation is called A) treasury stock.
B) book stock.
C) classified stock.
D) letter stock.
12) Tiffany owned 1000 shares of GIA stock which was selling for $1.50 per share when the company declared a 1 for 10 reverse split. After the split, Tiffany owned A) 100 shares worth approximately $15 per share.
B) 10,000 shares worth approximately $1.50 per share.
C) 100 shares worth approximately $1.50 per share.
D) 10,000 shares worth approximately $0.15 per share.
13) Wall Street Journal Stock quotations include
the highest and lowest price over the last 52 weeks
dividend and dividend yield
PE (price/earnings) ratio
the stock's beta
A) I and III only
B) I, III and IV only
C) I, II and III only
D) II and IV only
14) A round lot consists of
A) 100 shares.
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