Question 1

Selling Stock with Commissions 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

To calculate the money received after selling the shares, multiply the number of shares (200) by the price per share ($85.13) to get the total value of the shares, which is $17,026. Then, subtract the commission fee of $120 to get the final amount received: $17,026 - $120 = $16,906.

Question 2

P/E Ratio and Stock Price 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: $2.09 * 11.02 = $23.03.

Question 3

P/E Ratio and Stock Price 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: $3.85 * 17.37 = $66.87.

Question 4

Buying Stock with a Market Order 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

Since the market buy-order executed at the quoted ask price of $20.15, we can calculate the total cost by multiplying the number of shares (300) by the ask price ($20.15).

Total cost = 300 x $20.15 = $6,045.00

Therefore, the correct answer is C.

Question 5

P/E Ratio and Stock Price 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 formula for calculating the stock price using P/E ratio is:

Stock price = earnings per share × P/E ratio

Substituting the given values, we get:

Stock price = $6.85 × 15.19 = $104.05

Therefore, the stock price of IBM is $104.05. The correct answer is D.

Question 6

Buying Stock with a Market Order 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

The market order will execute at the best available price, which is the ask price of $96.24 per share. Therefore, to buy 100 shares, the cost is:
$96.24 x 100 = $9,624.00. The correct answer is choice C.

Question 7

Buying Stock with Commission 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

To calculate the total cost of buying 100 shares of RL, we need to multiply the share price by the number of shares and add the commission fee. The calculation would be:
100 shares x $85.13 per share = $8,513
Commission fee = $9.95
Total cost = $8,513 + $9.95 = $8,522.95
Therefore, the correct answer is choice C.

Question 8

Value a Constant Growth Stock Financial analysts forecast Best Buy Company (BBY)growth for the future to be 13 percent.Their recent dividend was $0.49.What is the value of their stock when the required rate of return is 14.13 percent?

Accepted Answer

The answer of Value a Constant Growth Stock Financial analysts...

Question 9

Selling Stock with a Limit Order 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 limit sell-order at $27.24 is higher than the current bid of $27.22 but lower than the current ask of $27.25. This means your order can only be executed if a buyer is willing to buy at your specified price. Therefore, if the trade executes, you will receive $2,724.00 (100 shares x $27.24 per share).

Question 10

Value of Dividends and Future Price A firm is expected to pay a dividend of $2.00 next year and $2.14 the following year.Financial analysts believe the stock will be at their target price of $75.00 in two years.Compute the value of this stock with a required return of 10 percent.

Accepted Answer

Using the dividend discount model, we can calculate the present value of the future dividends and the target stock price to determine the value of the stock today.

PV = (Div1 / (1 + r)^1) + (Div2 / (1 + r)^2) + (Price2 / (1 + r)^2)

PV = ($2.00 / 1.10) + ($2.14 / 1.10^2) + ($75.00 / 1.10^2)

PV = $1.82 + $1.68 + $61.39

PV = $64.89

Therefore, the value of the stock today with a required return of 10 percent is $65.57, which is closest to option C.

Question 11

Dividend Growth Annual dividends of Wal-Mart Stores (WMT)grew from $0.23 in 2000 to $0.83 in 2007.What was the annual growth rate?

Accepted Answer

The annual growth rate can be calculated using the formula:
Annual growth rate = ((Ending value/Beginning value)^(1/number of years)) - 1
Here, the beginning value is $0.23, the ending value is $0.83, and the number of years is 7 (2007 - 2000 = 7).
Annual growth rate = (($0.83/$0.23)^(1/7)) - 1 = 0.2012 or 20.12%
Therefore, the correct answer is (B) 20.12 percent.

Question 12

Stock Index Performance On November 26,2007,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

To calculate the return, we need to use the formula: 
Return = (Today’s Price – Yesterday’s Price) / Yesterday’s Price * 100

Today’s Price = 12,743.40 
Yesterday’s Price = 12,980.84 (since we are measuring the return from the previous day’s close)

Return = (12,743.40 - 12,980.84) / 12,980.84 * 100 = -1.83%

Therefore, the answer is C, -1.83 percent.

Question 13

Dividend Growth Annual dividends of Pfizer,Inc.(PFE)grew from $0.38 in 2000 to $1.15 in 2007.What was the annual growth rate?

Accepted Answer

To calculate annual growth rate, we use the formula: 
Growth rate = [(Ending dividend amount / Starting dividend amount) ^ (1/Number of years)] - 1
Plugging in the values, we get: 
Growth rate = [(1.15 / 0.38) ^ (1/7)] - 1
Growth rate = 1.1714 - 1
Growth rate = 0.1714 or 17.14%
Therefore, option B is correct.

Question 14

Selling Stock with a Limit Order 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

Since you are selling 400 shares, you will receive:
400 x $96.20 = $38,480.00

The limit sell-order at $96.20 will only execute if the bid reaches or exceeds that price. Therefore, since the bid is currently $96.24, your sell-order will execute and you will receive $38,480.00 from the buyer.

Question 15

Stock Index Performance On November 27,2007,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

To calculate the return percentage, we need to use the following formula: 
(Return/Initial Price) x 100 
In this case, the initial price is the closing price of the previous day (November 26, 2007), which was 12,743.44. 
So, the return percentage on November 27, 2007 is: 
((12,958.44-12,743.44)/12,743.44) x 100 = 1.69% 
Therefore, the answer is D, +1.69 percent.

Question 16

Value of a Preferred Stock 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 a preferred stock is calculated by dividing the annual dividend by the required rate of return. Here, $2.50 / 0.058 = $43.10.

Question 17

Selling Stock with Commissions 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

To calculate the money received after selling 100 shares, multiply the share price by the number of shares and then subtract the commission: (100 shares * $22.62) - $110 = $2,262 - $110 = $2,152.00.

Question 18

Buying Stock with Commission 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 buy 200 shares of Apple (AAPL), the cost of the shares would be:

$171.54 x 200 = $34,308

However, there is a commission fee of $8.50 per stock trade, so the total cost would be:

$34,308 + ($8.50 x 2) = $34,325

Therefore, the best answer is C, which is the closest option to $34,325.

Question 19

Value of Dividends and Future Price A firm is expected to pay a dividend of $3.00 next year and $3.21 the following year.Financial analysts believe the stock will be at their target price of $80.00 in two years.Compute the value of this stock with a required return of 13 percent.

Accepted Answer

To calculate the value of the stock, we need to compute the present value of both dividends and the target price, and then add them up.

PV (dividend next year) = $3 / (1 + 0.13) = $2.65 
PV (dividend in two years) = $3.21 / [(1 + 0.13)^2] = $2.42 
PV (target price) = $80 / [(1 + 0.13)^2] = $56.30

Therefore, the value of the stock is:

PV (dividend next year) + PV (dividend in two years) + PV (target price) = $2.65 + $2.42 + $56.30 = $61.37

The closest answer choice to $61.37 is C) $67.82. Therefore, the best choice is C.

Question 20

Value of a Preferred Stock 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 the preferred stock can be calculated using the formula:

Value of preferred stock = Annual dividend payment / Required rate of return

Plugging in the given values, we can calculate:

Value of preferred stock = $3.00 / 0.07 = $42.86

Therefore, the answer is D) $42.86.

Quiz 8: Valuing Stockspart

Selling Stock with Commissions 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?

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

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

Buying Stock with a Market Order 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?

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

Buying Stock with a Market Order 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?

Buying Stock with Commission 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?

Value a Constant Growth Stock Financial analysts forecast Best Buy Company (BBY) growth for the future to be 13 percent.Their recent dividend was $0.49.What is the value of their stock when the required rate of return is 14.13 percent?

Selling Stock with a Limit Order 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?

Value of Dividends and Future Price A firm is expected to pay a dividend of $2.00 next year and $2.14 the following year.Financial analysts believe the stock will be at their target price of $75.00 in two years.Compute the value of this stock with a required return of 10 percent.

Dividend Growth Annual dividends of Wal-Mart Stores (WMT) grew from $0.23 in 2000 to $0.83 in 2007.What was the annual growth rate?

Stock Index Performance On November 26,2007,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?

Dividend Growth Annual dividends of Pfizer,Inc.(PFE) grew from $0.38 in 2000 to $1.15 in 2007.What was the annual growth rate?

Selling Stock with a Limit Order 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?

Stock Index Performance On November 27,2007,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 of a Preferred Stock 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?

Selling Stock with Commissions 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?

Buying Stock with Commission 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?

Value of Dividends and Future Price A firm is expected to pay a dividend of $3.00 next year and $3.21 the following year.Financial analysts believe the stock will be at their target price of $80.00 in two years.Compute the value of this stock with a required return of 13 percent.

Value of a Preferred Stock 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?