Please review my answers below marked in bold and correct if neccessary. 1) The

Question

Please review my answers below marked in bold and correct if neccessary.

1) The expected rate of return on a share of common stock whose dividends are growing at a constant rate (g) is which of the following, where D1 is the next dividend and Vc is the current value of the stock?

(D1+g)/Vc
D1/Vc
D1/g
None of the above




2) Convertibility is a common feature of common stock; it allows the common stockholders to convert their common shares into preferred shares or into bonds.
TRUE/FALSE
3) The sum of the present values of an investment's expected future cash flows is known as the investment's intrinsic value.
TRUE/FALSE

4) Common stock does not mature.
TRUE/FALSE
5) Like common stock, preferred stock pays a dividend that varies with earnings
TRUE/FALSE
6) The security market line reflects an individual investor's attitude toward risk
TRUE/FALSE
7) A bond rating of A is lower than a bond rating of AA.
TRUE/FALSE
8) An efficient market may be defined as one in which the values of all securities at any instant in time fully reflect all available information
TRUE/FALSE
9) The total amount of interest earned on a lump sum investment will exactly double if the amount of time is exactly doubled, everything else equal.
TRUE/FALSE

10) Unlike market value, the intrinsic value of an asset is estimated independently of risk
TRUE/FALSE
11) Beginning with an investment in one company's securities, as we add securities of other companies in other industries to our portfolio, which type of risk declines:
Systematic Risk
Market Risk
Non-diversifiable Risk
Unsystematic
12) Which of the following statements is true:
The value of a bond is inversely related to changes in investors' present required rate of return
If interest rates decrease, the value of a bond will decrease
If interest rates increase, the value of a bond will increase
None of the above
13) One characteristic of an annuity is that the payment amount is the same during each period
TRUE/FALSE
14) A security with a beta of one has a required rate of return equal to the overall market rate of return
TRUE/FALSE

Explanation / Answer

Number one is incorrect. The answer should be: D1/Vc +g

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