1. In the constant dividend growth model, the expected return of a stock is comprised of two components. What are these two components?

(a) expected dividend yield and expected tax rate

(b) expected liquidity premium and expected tax rate

(c) expected capital gains yield and expected growth premium

(d) expected dividend yield and expected capital gains yield

(e) expected dividend yield and expected liquidity premium

2. Which one of the following transactions occurs in the primary market?

(a) purchase of 500 shares of GE stock from a current shareholder

(b) gift of 100 shares of stock to a charitable organization

(c) gift of 200 shares of stock by a mother to her daughter

(d) purchase of newly issued stock from AT&T

(e) IBM's purchase of stock from current shareholders of GE stock

3. A company has just paid a quarterly dividend of $1.50 per share, which is expected to increase 1% every quarter into the future. The future dividends are an example of which type of cash flow stream?

(a) perpetuity

(b) ordinary annuity

(c) growing annuity

(d) growing perpetuity

(e) annuity due

4. A particular stock is currently selling for $30.00 per share. An annual dividend of $2.00 per share was paid only moments ago, and it is expected that dividends will grow 4% per year. What are the expected dividend yield and the expected capital gains yield according to the constant dividend growth model?

(a) 4.00% and 6.67%, respectively

(b) 13.33% and 4.00%, respectively

(c) 8.00% and 12.00%, respectively

(d) 6.93% and 4.00%, respectively

5. You own shares of a cumulative preferred stock which last paid a quarterly dividend in the fourth quarter of 2015. It is now the third quarter of 2016. The firm has recently suffered some financial setbacks and has not yet paid any dividends in 2016. However, the company is committed to pay dividends to both preferred and common shares in the current quarter. As a preferred shareholder, you should expect to receive the equivalent of ____ quarter(s) of dividends when the next dividend is paid.

(a) 0

(b) 1

(c) 2

(d) 3

(e) either 1, 2, or 3