Chapter 8

Question 1

The bid price is the price that a dealer pays for a security. T or F?

Answer 1

True

Question 2

Which of the following is a characteristic of common stock?         
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	Fixed dividends
	Limited life
	Limited liability for owners

Answer 2

Fixed dividends

Question 3

The constant growth dividend model cannot be applied to value the stock of a company whose dividends are declining at a constant rate. T or F?

Answer 3

False

Question 4

The reason we cannot apply the constant growth dividend model in the case where the growth rate, g, is greater than or equal to the required rate, R, is because it would result in the value of the stock becoming

Answer 4

Negative