Question 1

When reviewing a stock's price measured to other stocks, you are assessing a stock's:

Accepted Answer

When reviewing a stock's price in comparison to other stocks, you are assessing its relative value. This involves comparing various metrics or ratios (like P/E ratio, growth rates, etc.) of one stock against those of others to determine its attractiveness or potential for investment relative to its peers.

Question 2

The size of the firm measured as the current stock price multiplied by the number of shares outstanding is referred to as the firm's

Accepted Answer

Market capitalization is calculated by multiplying the current stock price by the total number of outstanding shares, representing the total market value of a company's equity.

Question 3

If a preferred stock from Pfizer Inc. (PFE) pays $3.00 in annual dividends, and the required return on the preferred stock is 7 percent, what's the value of the stock?

Accepted Answer

The value of preferred stock is calculated by dividing the annual dividend by the required return. So, $3.00 / 0.07 = $42.86.

Question 4

At your full-service brokerage firm, it costs $120 per stock trade. How much money do you receive after selling 200 shares of Ralph Lauren (RL), which trades at $85.13?

Accepted Answer

The total revenue from selling 200 shares at $85.13 each is $17,026.00. After deducting the $120 brokerage fee, you receive $16,906.00.

Question 5

If on November 26, 2017, The Dow Jones Industrial Average closed at 12,743.40, which was down 237.44 that day. What was the return (in percent) of the stock market that day?

Accepted Answer

The return can be calculated using the formula: [(Final Value - Initial Value) / Initial Value] * 100. The initial value is the closing value plus the decrease, so 12,743.40 + 237.44 = 12,980.84. The return is [(12,743.40 - 12,980.84) / 12,980.84] * 100 = -237.44 / 12,980.84 * 100 ≈ -1.83 percent.

Question 6

International Business Machines (IBM) has earnings per share of $6.85 and a P/E ratio of 15.19. What is the stock price?

Accepted Answer

The stock price is calculated by multiplying the earnings per share (EPS) by the P/E ratio. So, $6.85 * 15.19 = $104.05.

Question 7

We often use the P/E ratio model with the firm's growth rate to estimate

Accepted Answer

The P/E ratio model, when combined with the firm's growth rate, is often used to estimate a stock's future price by projecting future earnings and applying the P/E ratio to those earnings.

Question 8

At your discount brokerage firm, it costs $8.50 per stock trade. How much money do you need to buy 200 shares of Apple (AAPL), which trades at $171.54?

Accepted Answer

To calculate the total cost, multiply the price per share by the number of shares: 200 shares * $171.54 = $34,308.00. Then add the brokerage fee of $8.50: $34,308.00 + $8.50 = $34,316.50.

Question 9

At your full-service brokerage firm, it costs $110 per stock trade. How much money do you receive after selling 100 shares of Time Warner, Inc. (TMX), which trades at $22.62?

Accepted Answer

The total revenue from selling 100 shares at $22.62 each is $2,262.00. After deducting the $110 brokerage fee, you receive $2,152.00.

Question 10

You would like to sell 100 shares of Pfizer, Inc. (PFE). The current bid and ask quotes are $27.22 and $27.25, respectively. You place a limit sell-order at $27.24. If the trade executes, how much money do you receive from the buyer?

Accepted Answer

The trade executes at your limit price of $27.24 per share. Since you are selling 100 shares, you would receive $27.24 * 100 = $2,724.00 from the buyer.

Question 11

If a preferred stock from Ecology and Environment, Inc. (EEI) pays $2.50 in annual dividends, and the required return on the preferred stock is 5.8 percent, what's the value of the stock?

Accepted Answer

The value of the preferred stock can be calculated using the formula for valuing preferred stocks: Value = Dividend / Required Return. Plugging in the given values: Value = $2.50 / 0.058 = $43.10.

Question 12

You would like to buy shares of International Business Machines (IBM). The current bid and ask quotes are $96.17 and $96.24, respectively. You place a market buy-order for 100 shares that executes at these quoted prices. How much money did it cost to buy these shares?

Accepted Answer

When you place a market buy order, you buy at the ask price, which is $96.24 per share for IBM in this scenario. For 100 shares, the cost is 100 shares * $96.24/share = $9,624.00.

Question 13

You would like to buy shares of Nokia (NOK). The current bid and ask quotes are $20.13 and $20.15, respectively. You place a market buy-order for 300 shares that executes at these quoted prices. How much money did it cost to buy these shares?

Accepted Answer

Market buy orders are executed at the ask price, so the cost is 300 shares * $20.15/share = $6,045.00.

Question 14

Pfizer, Inc. (PFE) has earnings per share of $2.09 and a P/E ratio of 11.02. What is the stock price?

Accepted Answer

The stock price is calculated by multiplying the earnings per share (EPS) by the P/E ratio. So, $2.09 (EPS) * 11.02 (P/E ratio) = $23.03.

Question 15

Dividend yield is defined as

Accepted Answer

Dividend yield is calculated by taking the sum of the dividends paid over the last four quarters and dividing it by the current stock price, then expressing that figure as a percentage. This provides investors with a measure of the income generated by each dollar invested in the stock.

Question 16

Ralph Lauren (RL) has earnings per share of $3.85 and a P/E ratio of 17.37. What is the stock price?

Accepted Answer

The stock price is calculated by multiplying the earnings per share (EPS) by the P/E ratio. So, $3.85 * 17.37 = $66.87.

Question 17

At your discount brokerage firm, it costs $9.95 per stock trade. How much money do you need to buy 100 shares of Ralph Lauren (RL), which trades at $85.13?

Accepted Answer

The cost of buying 100 shares of Ralph Lauren at $85.13 each is $8,513 (100 * $85.13). Adding the brokerage fee of $9.95 gives a total of $8,522.95.

Question 18

If on November 27, 2017, The Dow Jones Industrial Average closed at 12,958.44, which was up 215.04 that day. What was the return (in percent) of the stock market that day?

Accepted Answer

The return can be calculated as the change in value divided by the starting value, then multiplied by 100 to convert to a percentage. The starting value is the closing value minus the change, which is 12,958.44 - 215.04 = 12,743.4. Thus, the return is (215.04 / 12,743.4) * 100 = approximately 1.69 percent.

Question 19

Value stocks usually have

Accepted Answer

The answer of Value stocks usually have
...

Question 20

You would like to sell 400 shares of International Business Machines (IBM). The current bid and ask quotes are $96.24 and $96.17, respectively. You place a limit sell-order at $96.20. If the trade executes, how much money do you receive from the buyer?

Accepted Answer

The answer of You would like to sell 400 shares...

Quiz 8: Valuing Stocks

When reviewing a stock's price measured to other stocks, you are assessing a stock's:

The size of the firm measured as the current stock price multiplied by the number of shares outstanding is referred to as the firm's

If a preferred stock from Pfizer Inc. (PFE) pays $3.00 in annual dividends, and the required return on the preferred stock is 7 percent, what's the value of the stock?

At your full-service brokerage firm, it costs $120 per stock trade. How much money do you receive after selling 200 shares of Ralph Lauren (RL) , which trades at $85.13?

If on November 26, 2017, The Dow Jones Industrial Average closed at 12,743.40, which was down 237.44 that day. What was the return (in percent) of the stock market that day?

International Business Machines (IBM) has earnings per share of $6.85 and a P/E ratio of 15.19. What is the stock price?

We often use the P/E ratio model with the firm's growth rate to estimate

At your discount brokerage firm, it costs $8.50 per stock trade. How much money do you need to buy 200 shares of Apple (AAPL) , which trades at $171.54?

At your full-service brokerage firm, it costs $110 per stock trade. How much money do you receive after selling 100 shares of Time Warner, Inc. (TMX) , which trades at $22.62?

You would like to sell 100 shares of Pfizer, Inc. (PFE) . The current bid and ask quotes are $27.22 and $27.25, respectively. You place a limit sell-order at $27.24. If the trade executes, how much money do you receive from the buyer?

If a preferred stock from Ecology and Environment, Inc. (EEI) pays $2.50 in annual dividends, and the required return on the preferred stock is 5.8 percent, what's the value of the stock?

You would like to buy shares of International Business Machines (IBM) . The current bid and ask quotes are $96.17 and $96.24, respectively. You place a market buy-order for 100 shares that executes at these quoted prices. How much money did it cost to buy these shares?

You would like to buy shares of Nokia (NOK) . The current bid and ask quotes are $20.13 and $20.15, respectively. You place a market buy-order for 300 shares that executes at these quoted prices. How much money did it cost to buy these shares?

Pfizer, Inc. (PFE) has earnings per share of $2.09 and a P/E ratio of 11.02. What is the stock price?

Dividend yield is defined as

Ralph Lauren (RL) has earnings per share of $3.85 and a P/E ratio of 17.37. What is the stock price?

At your discount brokerage firm, it costs $9.95 per stock trade. How much money do you need to buy 100 shares of Ralph Lauren (RL) , which trades at $85.13?

If on November 27, 2017, The Dow Jones Industrial Average closed at 12,958.44, which was up 215.04 that day. What was the return (in percent) of the stock market that day?

Value stocks usually have

You would like to sell 400 shares of International Business Machines (IBM) . The current bid and ask quotes are $96.24 and $96.17, respectively. You place a limit sell-order at $96.20. If the trade executes, how much money do you receive from the buyer?