This document contains a link to an archive file with questions for a BUS 401 Week 2 Quiz. The archive file includes 10 multiple choice questions covering various business and finance concepts such as stock and bond valuation, dividend growth rates, time value of money, and required rates of return. It also provides the students' answers to the questions and explanations from the instructor regarding the correct answers.

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This archive file of BUS 401 Week 2 Quiz Version a consists
of:
1. Butler Corp paida dividendtoday of $5 per share. The
dividendis 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 dividendand 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 variablea financialmanager 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 valueof $1,000,
a coupon of $120 (annually),and matures in 10 years?
Assume a required rate of return of 7.8%.
8. Keyes Corporationpreferred stock paysan annualdividend
of $7 per share. Which of the following statements is true for
an investorwith a required return of 9%?

2. 9. A corporate bond has a couponrate of 12%, a yield to
maturity of 10.55%, a face valueof $1,000, and a market
price of $850. Therefore, the annualinterest payment is
10. What is the value of a preferred stock that paysa $4.50
dividendto an investor with a required rate of return of 10%?
Business - General Business
.
Question :
The longer we have to wait for a future amount to be
received:
Student Answer:
the lower its present value will be.
the higher its present valuewill be.
Time does not affect present value,so it doesn’t matter how
long we have to wait.
Beyond 10 years the valuedoesn’t change anymore because
10 years might as well be 20 years.
Instructor Explanation:
The answer can be found in Section 4.3: The Time Valueof a
Single Cash Flow.
Points Received:
1 of 1
Comments:

3. 2.
Question :
Compoundingmeans that:
Student Answer:
dollarinterest the first year is multipliedby the number of
years to get total interest.
the same dollaramount of interest is paid each period.
interest is paidon interest earned in earlier periods.
the rate of interest grows over time.
Instructor Explanation:
The answer can be found in Section 4.2: Compoundand
Simple Interest.
Points Received:
1 of 1
Comments:
3.
Question :
An ordinary annuityhas its first payment ______, but an
annuitydue has its first payment _________.
Student Answer:
at the beginningof the period;at the beginningof the period.

4. at the beginningof the period;at the end of the period.
at the end of the period; at the end of the period.
at the end of the period; at the beginningof the period.
Instructor Explanation:
The answer can be found in Section 4.4: ValuingMultiple
Cash Flows.
Points Received:
1 of 1
Comments:
4.
Question :
The great majority of stock trades occur:
Student Answer:
in the secondary markets.
in the primary market.
as IPOs (initialpublic offerings).
directly between the company and investors.
Instructor Explanation:
The answer can be found in Section 5.1: Stocks.

5. Points Received:
1 of 1
Comments:
5.
Question :
Shareholdersgains come in the form of:
Student Answer:
only dividends.
only capitalgains.
dividendsand capital gains.
interest payments.
Instructor Explanation:
The answer can be found in the introductionto Chapter5.
Points Received:
1 of 1
Comments:
6.
Question :
Interest rates are given as annualrates. If semiannual(twice
a year) compoundingis being used, then you would make the

6. following adjustments:
Student Answer:
Double the rate and doublethe number of years.
Double the rate and halve the number of years.
Halve the rate and halve the number of years.
Halve the rate and doublethe number of years.
Instructor Explanation:
The answer can be found in Section 4.3: The Time Valueof a
Single Cash Flow.
Points Received:
1 of 1
Comments:
7.
Question :
Which of the following is true of the structure of a zero-
coupon bond?
Student Answer:
an annuityof interest payments and a single principal
payment at maturity
no interim interest paymentsbut a variablepayment at
maturity, dependingon interest rates

7. an annuityof payments comprised of both interest and
principal
no interim interest paymentsand a single payment at
maturity
Instructor Explanation:
The answer can be found in Section 5.2: Bonds.
Points Received:
1 of 1
Comments:
8.
Question :
If we make the assumption that a company’sdividendsgrow
at some constant rate, then we can value the stock as:
Student Answer:
a growing perpetuity.
a growing annuity.
a perpetuity.
an annuity.
Instructor Explanation:
The answer can be found in Section 5.1: Stocks.

8. Points Received:
1 of 1
Comments:
9.
Question :
Which of the following is NOT true of preferred stock?
Student Answer:
Preferred stock generally pays a fixed dividend.
Preferred stock is a perpetuity.
Dividendson preferred stock are tax deductible.
Preferred stock dividendshave a higher priority than
common stock dividends.
Instructor Explanation:
The answer can be found in Section 5.1: Stocks.
Points Received:
1 of 1
Comments:
10.
Question :
Zeta Corporationjust paida $2.00 dividend.Analysts believe

9. that Zeta Corporation’sdividendwill grow by 20% next year,
and then settle into a constant growth regime at 5% per year
into the future. If investors assign a required rate of return of
12% to Zeta’s stock, what should the stock sell for today?
Student Answer:
$30.00
$32.14
$34.29
$36.00
Instructor Explanation:
The answer can be found in Section 5.1: Stocks.
Points Received:
1 of 1
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