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BUS 401 Week 2 Quiz Version a

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1. Butler Corp paid a dividend today of $5 per share. The dividend is expected to grow at a constant rate of 6.5% per year. If Butler Corp stock is selling for $50.00 per share, the stockholders' expected rate of return is

2.The minimum rate of return necessary to attract an investor to purchase or hold a security is referred to as the stock's beta.

3. If two firms have the same current dividend and the same expected growth rate, their stocks must sell at the same current price or else the market will not be in equilibrium.

4. The relevant variable a financial manager uses to measure returns is:

5. A typical measure for the risk-free rate of return is the U.S.

6. Billings, Inc. common stock has a beta of 1.2. If the expected risk free return is 4% and the expected market risk premium is 9%, what is the expected return on Billing's stock?

7. What is the value of a bond that has a par value of $1,000, a coupon of $120 (annually), and matures in 10 years? Assume a required rate of return of 7.8%.

8. Keyes Corporation preferred stock pays an annual dividend of $7 per share. Which of the following statements is true for an investor with a required return of 9%?

9. A corporate bond has a coupon rate of 12%, a yield to maturity of 10.55%, a face value of $1,000, and a market price of $850. Therefore, the annual interest payment is

10. What is the value of a preferred stock that pays a $4.50 dividend to an investor with a required rate of return of 10%?

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