CTFA

CTFA practice questions, page 20 of 35, with answer review and explanations.

Question 96

If the intrinsic value of a stock is greater than its market value, which of the following is a reasonable conclusion?

  1. The stock has a low level of risk
  2. The stock offers a high dividend payout ratio
  3. The market is undervaluing the stock
  4. The market is overvaluing the stock

Question 97

When the market's required rate of return for a particular bond is much less than its coupon rate, the bond is selling at:

  1. A premium
  2. A discount
  3. cannot be determined without more information
  4. Face value

Question 98

Virgo Airlines will pay a $4 dividend next year on its common stock, which is currently selling at $100 per share. What is the market's required return on this investment if the dividend is expected to grow at 5% forever?

  1. 4 Percent
  2. 5 Percent
  3. 7 Percent
  4. 9 Percent

Question 99

Interest rates and bond prices:

  1. Move in the same direction
  2. Move in opposite directions
  3. Sometimes move in the same direction, sometimes in opposite directions
  4. Have no relationship with each other (i.e., they are independent)

Question 100

The expected rate of return on a bond if bought at its current market price and held to maturity.

  1. Yield to maturity
  2. Current yield
  3. Coupon Yield
  4. Capital gains yield