1. An increase in which of the following will DECREASE the current value of a stock according to the dividend growth model?
I. discount rate
II. dividend amount
III. dividend growth rate
III only
I and III only
I, II and III
I and II only
I only
2. Which one of the following statements is correct?
The dividend growth model can be used to compute the current value of any stock.
The capital gains yield is the monthly rate of change in a stock's price.
Preferred stocks have non-zero growth dividends.
An increase in the required return will decrease the capital gains yield.
A constant dividend stock can be valued using the dividend growth model.
3. Which of the following statements related to interest rates are INCORRECT?
I. When comparing loans, you should compare the annual percentage rate.
II. Annual and effective interest rates are equal when interest is compounded daily.
III. Effective annual rates consider the effect of interest earned on reinvested interest payments.
IV. Lenders are required by law to disclose the effective annual rate of a loan to prospective borrowers.
II and IV only
I, II, and IV only
II, III, and IV only
II and III only
I and II only