FNAN 522 - Exam 1 Questions and Answers Latest Update 2025-2026
According to the average accounting return rule, a project is acceptable if its average
accounting return exceeds _______ - Answers a target average accounting return
when the stock being valued does not pay dividends, the dividend growth model can/cannot still
be used - Answers can
the analyst must assume that, at some point in the company's future, it begins paying dividends
the formula for valuing a constant growth stock is ______ - Answers Psub0 = Dsub1/(R − g)
t/f: for investors in the stock market, dividends from stocks are fixed and guaranteed, while
capital gains are variable and not guaranteed - Answers false:
neither dividends nor capital gains are fixed or guaranteed
a benchmark PE ratio can be determined using (2) - Answers -a company's own historical PEs
-the PEs of similar companies
the AAR is calculated by taking the average net income and dividing it by - Answers the average
book value
common stock has no preference either in receiving _____________ or in bankruptcy - Answers
dividends
the goal of many successful organizations is: - Answers a steady rate of growth in dividends
when voting for the board of directors, the number of votes a shareholder is entitled to is usually
__________ vote per share held - Answers one
which entity declares a dividend? - Answers the board of directors
preferred stock has preference over common stick in the ____________ & ____________ - Answers -
payment of dividends
- distribution of corporation assets in the event of liquidation
initial public offerings of stock occur which market? - Answers primary market
a person who brings buyers and sellers together is called a _________ - Answers broker
a _________ is a payment by a corporation to shareholders, made in either cash or stock -
Answers dividend
investment firms that are active participants in stocks assigned to them are called: - Answers
supplemental liquidity providers
, a stock with dividend priority over common stock is called a - Answers preferred stock
NASDAQ (National Association of Securities Dealers Automated Quotations) features (2) -
Answers - computer network of securities dealers
- multiple market maker system
stock price reporting has increasingly moved from traditional print media to the _____________ -
Answers internet in recent years
the IRR on an investment is the required return that results in a zero NPV when it is used as
what? - Answers the discount rate
someone who maintains an inventory of stocks and buys and sells those stocks is known as a
what? - Answers dealer
the NYSE member who acts as a dealer in a small number of securities is called a what? -
Answers a specialist
an NYSE member who acts as a dealer in particular stocks is called a ____________ - Answers
designated market maker
future value - Answers cash value of an investment at some time in the future
in general, if you invest for one period at an interest rate of r, your investment will what? -
Answers grow to 1+r
compounding - Answers the process of leaving your money and any accumulated interest in an
investment for more than one period, thereby reinvesting the interest
given the same rate of interest, which type of interest would earn more money? - Answers
compound (interest on interest)
interest earned only on the original principal amount invested is called what? - Answers simple
interest
if you invest for a single period at an interest rate of r, your money will grow to ___________ per
dollar invested - Answers (1+r)
future value = - Answers 1 x (1+r)^t
t/f
small changes in the interest rate affect the future value of a small-term investment more than
they would affect the value of a long-term investment - Answers false
small rate differences can be worth thousands of dollars, especially when either the amount or
the time period is large
According to the average accounting return rule, a project is acceptable if its average
accounting return exceeds _______ - Answers a target average accounting return
when the stock being valued does not pay dividends, the dividend growth model can/cannot still
be used - Answers can
the analyst must assume that, at some point in the company's future, it begins paying dividends
the formula for valuing a constant growth stock is ______ - Answers Psub0 = Dsub1/(R − g)
t/f: for investors in the stock market, dividends from stocks are fixed and guaranteed, while
capital gains are variable and not guaranteed - Answers false:
neither dividends nor capital gains are fixed or guaranteed
a benchmark PE ratio can be determined using (2) - Answers -a company's own historical PEs
-the PEs of similar companies
the AAR is calculated by taking the average net income and dividing it by - Answers the average
book value
common stock has no preference either in receiving _____________ or in bankruptcy - Answers
dividends
the goal of many successful organizations is: - Answers a steady rate of growth in dividends
when voting for the board of directors, the number of votes a shareholder is entitled to is usually
__________ vote per share held - Answers one
which entity declares a dividend? - Answers the board of directors
preferred stock has preference over common stick in the ____________ & ____________ - Answers -
payment of dividends
- distribution of corporation assets in the event of liquidation
initial public offerings of stock occur which market? - Answers primary market
a person who brings buyers and sellers together is called a _________ - Answers broker
a _________ is a payment by a corporation to shareholders, made in either cash or stock -
Answers dividend
investment firms that are active participants in stocks assigned to them are called: - Answers
supplemental liquidity providers
, a stock with dividend priority over common stock is called a - Answers preferred stock
NASDAQ (National Association of Securities Dealers Automated Quotations) features (2) -
Answers - computer network of securities dealers
- multiple market maker system
stock price reporting has increasingly moved from traditional print media to the _____________ -
Answers internet in recent years
the IRR on an investment is the required return that results in a zero NPV when it is used as
what? - Answers the discount rate
someone who maintains an inventory of stocks and buys and sells those stocks is known as a
what? - Answers dealer
the NYSE member who acts as a dealer in a small number of securities is called a what? -
Answers a specialist
an NYSE member who acts as a dealer in particular stocks is called a ____________ - Answers
designated market maker
future value - Answers cash value of an investment at some time in the future
in general, if you invest for one period at an interest rate of r, your investment will what? -
Answers grow to 1+r
compounding - Answers the process of leaving your money and any accumulated interest in an
investment for more than one period, thereby reinvesting the interest
given the same rate of interest, which type of interest would earn more money? - Answers
compound (interest on interest)
interest earned only on the original principal amount invested is called what? - Answers simple
interest
if you invest for a single period at an interest rate of r, your money will grow to ___________ per
dollar invested - Answers (1+r)
future value = - Answers 1 x (1+r)^t
t/f
small changes in the interest rate affect the future value of a small-term investment more than
they would affect the value of a long-term investment - Answers false
small rate differences can be worth thousands of dollars, especially when either the amount or
the time period is large
