1. Which one of the following statements is correct?

The preemptive right grants shareholders the right to purchase additional shares in the company prior to shares available for public.

Dividends become a liability of the firm on the date of payment.

The stated value of most preferred stock is $1,000 per share.

A market maker on the floor of an exchange is called a trader.

2. Under major voting, each share of stock allows the shareholder one vote, and each position on the board of directors is voted on separately. But with cumulative voting, each share of stock allows the stockholder a number of votes equal to the number of directors being selected. So major voting procedure helps protect minority shareholders. _____

True

False

3. A firm is expected to an annual dividend of $1.50 per share at the end of Year 1. What is the anticipated dividend for year 3 if the firm increases its dividend by 2% annually?

$1.50 x (1.02)¹

$1.50 x (1.02)²

$1.50 x (1.02)³

$1.50 x (1.02)⁴