FNAN 522 - EXAM 1 QUESTIONS WITH
VERIFIED ANSWERS. A+ GRADE
2025/2026.
According to the average accounting return rule, a project is acceptable if its average
accounting return exceeds _______ - ANS a target average accounting return
when the stock being valued does not pay dividends, the dividend growth model can/cannot
still be used - ANS 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 ______ - ANS 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 - ANS false:
neither dividends nor capital gains are fixed or guaranteed
a benchmark PE ratio can be determined using (2) - ANS -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 - ANS the average
book value
1 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED
,common stock has no preference either in receiving _____________ or in bankruptcy -
ANS dividends
the goal of many successful organizations is: - ANS 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 - ANS one
which entity declares a dividend? - ANS the board of directors
preferred stock has preference over common stick in the ____________ & ____________ -
ANS - payment of dividends
- distribution of corporation assets in the event of liquidation
initial public offerings of stock occur which market? - ANS primary market
a person who brings buyers and sellers together is called a _________ - ANS broker
a _________ is a payment by a corporation to shareholders, made in either cash or stock -
ANS dividend
investment firms that are active participants in stocks assigned to them are called: -
ANS supplemental liquidity providers
a stock with dividend priority over common stock is called a - ANS preferred stock
2 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED
, NASDAQ (National Association of Securities Dealers Automated Quotations) features (2) -
ANS - computer network of securities dealers
- multiple market maker system
stock price reporting has increasingly moved from traditional print media to the
_____________ - ANS 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? - ANS the discount rate
someone who maintains an inventory of stocks and buys and sells those stocks is known as a
what? - ANS dealer
the NYSE member who acts as a dealer in a small number of securities is called a what? -
ANS a specialist
an NYSE member who acts as a dealer in particular stocks is called a ____________ -
ANS designated market maker
future value - ANS 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? -
ANS grow to 1+r
compounding - ANS 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? -
ANS compound (interest on interest)
3 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED
VERIFIED ANSWERS. A+ GRADE
2025/2026.
According to the average accounting return rule, a project is acceptable if its average
accounting return exceeds _______ - ANS a target average accounting return
when the stock being valued does not pay dividends, the dividend growth model can/cannot
still be used - ANS 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 ______ - ANS 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 - ANS false:
neither dividends nor capital gains are fixed or guaranteed
a benchmark PE ratio can be determined using (2) - ANS -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 - ANS the average
book value
1 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED
,common stock has no preference either in receiving _____________ or in bankruptcy -
ANS dividends
the goal of many successful organizations is: - ANS 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 - ANS one
which entity declares a dividend? - ANS the board of directors
preferred stock has preference over common stick in the ____________ & ____________ -
ANS - payment of dividends
- distribution of corporation assets in the event of liquidation
initial public offerings of stock occur which market? - ANS primary market
a person who brings buyers and sellers together is called a _________ - ANS broker
a _________ is a payment by a corporation to shareholders, made in either cash or stock -
ANS dividend
investment firms that are active participants in stocks assigned to them are called: -
ANS supplemental liquidity providers
a stock with dividend priority over common stock is called a - ANS preferred stock
2 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED
, NASDAQ (National Association of Securities Dealers Automated Quotations) features (2) -
ANS - computer network of securities dealers
- multiple market maker system
stock price reporting has increasingly moved from traditional print media to the
_____________ - ANS 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? - ANS the discount rate
someone who maintains an inventory of stocks and buys and sells those stocks is known as a
what? - ANS dealer
the NYSE member who acts as a dealer in a small number of securities is called a what? -
ANS a specialist
an NYSE member who acts as a dealer in particular stocks is called a ____________ -
ANS designated market maker
future value - ANS 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? -
ANS grow to 1+r
compounding - ANS 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? -
ANS compound (interest on interest)
3 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED
