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1、精选优质文档倾情为你奉上精选优质文档倾情为你奉上专心专注专业专心专注专业精选优质文档倾情为你奉上专心专注专业Economics of Money, Banking, and Financial Markets, 11e, Global Edition (Mishkin)Chapter 7 The Stock Market, the Theory of Rational Expectations, and the Efficient Market Hypothesis7.1 Computing the Price of Common Stock1) A stockholders ownershi

2、p of a companys stock gives her the right toA) vote and be the primary claimant of all cash flows.B) vote and be the residual claimant of all cash flows.C) manage and assume responsibility for all liabilities.D) vote and assume responsibility for all liabilities.Answer: BAACSB: Analytical Thinking2)

3、 Stockholders are residual claimants, meaning that theyA) have the first priority claim on all of a companys assets.B) are liable for all of a companys debts.C) will never share in a companys profits.D) receive the remaining cash flow after all other claims are paid.Answer: DAACSB: Analytical Thinki

4、ng3) Periodic payments of net earnings to shareholders are known asA) capital gains.B) dividends.C) profits.D) interest.Answer: BAACSB: Analytical Thinking4) The value of any investment is found by computing the A) present value of all future sales.B) present value of all future liabilities.C) futur

5、e value of all future expenses.D) present value of all future cash flows.Answer: DAACSB: Analytical Thinking5) In the one-period valuation model, the value of a share of stock today depends uponA) the present value of both the dividends and the expected sales price.B) only the present value of the f

6、uture dividends.C) the actual value of the dividends and expected sales price received in one year.D) the future value of dividends and the actual sales price.Answer: AAACSB: Analytical Thinking6) In the one-period valuation model, the current stock price increases ifA) the expected sales price incr

7、eases.B) the expected sales price falls.C) the required return increases.D) dividends are cut.Answer: AAACSB: Reflective Thinking7) In the one-period valuation model, an increase in the required return on investments in equityA) increases the expected sales price of a stock.B) increases the current

8、price of a stock.C) reduces the expected sales price of a stock.D) reduces the current price of a stock.Answer: DAACSB: Reflective Thinking8) In a one-period valuation model, a decrease in the required return on investments in equity causes a(n) _ in the _ price of a stock.A) increase; currentB) inc

9、rease; expected salesC) decrease; currentD) decrease; expected salesAnswer: AAACSB: Reflective Thinking9) Using the one-period valuation model, assuming a year-end dividend of $0.11, an expected sales price of $110, and a required rate of return of 10%, the current price of the stock would beA) $110

10、.11.B) $121.12.C) $100.10.D) $100.11Answer: CAACSB: Analytical Thinking10) Using the one-period valuation model, assuming a year-end dividend of $1.00, an expected sales price of $100, and a required rate of return of 5%, the current price of the stock would beA) $110.00.B) $101.00.C) $100.00.D) $96

11、.19.Answer: DAACSB: Analytical Thinking11) In the generalized dividend model, if the expected sales price is in the distant futureA) it does not affect the current stock price.B) it is more important than dividends in determining the current stock price.C) it is equally important with dividends in d

12、etermining the current stock price.D) it is less important than dividends but still affects the current stock price.Answer: AAACSB: Analytical Thinking12) In the generalized dividend model, a future sales price far in the future does not affect the current stock price becauseA) the present value can

13、not be computed.B) the present value is almost zero.C) the sales price does not affect the current price.D) the stock may never be sold.Answer: BAACSB: Analytical Thinking13) In the generalized dividend model, the current stock price is the sum ofA) the actual value of the future dividend stream.B)

14、the present value of the future dividend stream.C) the present value of the future dividend stream plus the actual future sales price.D) the present value of the future sales price.Answer: BAACSB: Analytical Thinking14) Using the Gordon growth model, a stocks current price will increase ifA) the div

15、idend growth rate increases.B) the growth rate of dividends falls.C) the required rate of return on equity rises.D) the expected sales price rises.Answer: AAACSB: Reflective Thinking15) Using the Gordon growth model, a stocks current price decreases whenA) the dividend growth rate increases.B) the r

16、equired return on equity decreases.C) the expected dividend payment increases.D) the growth rate of dividends decreases.Answer: DAACSB: Reflective Thinking16) In the Gordon growth model, a decrease in the required rate of return on equityA) increases the current stock price.B) increases the future s

17、tock price.C) reduces the future stock price.D) reduces the current stock price.Answer: AAACSB: Reflective Thinking17) Using the Gordon growth formula, if D1 is $2.00, ke is 12% or 0.12, and g is 10% or 0.10, then the current stock price isA) $20.B) $50.C) $100.D) $150.Answer: CAACSB: Analytical Thi

18、nking18) Using the Gordon growth formula, if D1 is $1.00, ke is 10% or 0.10, and g is 5% or 0.05, then the current stock price isA) $10.B) $20.C) $30.D) $40.Answer: BAACSB: Analytical Thinking19) Using the Gordon growth model, if D1 is $.50, ke is 7%, and g is 5%, then the present value of the stock

19、 isA) $2.50.B) $25.C) $50.D) $46.73.Answer: BAACSB: Analytical Thinking20) One of the assumptions of the Gordon Growth Model is that dividends will continue growing at _ rate.A) an increasingB) a fastC) a constantD) an escalatingAnswer: CAACSB: Analytical Thinking21) In the Gordon Growth Model, the

20、growth rate is assumed to be _ the required return on equity.A) greater thanB) equal toC) less thanD) proportional toAnswer: CAACSB: Analytical Thinking22) You believe that a corporations dividends will grow 5% on average into the foreseeable future. If the companys last dividend payment was $5 what

21、 should be the current price of the stock assuming a 12% required return?Answer: Use the Gordon Growth Model.$5(1 + .05)/(.12 - .05) = $75AACSB: Analytical Thinking23) What rights does ownership interest give stockholders?Answer: Stockholders have the right to vote on issues brought before the stock

22、holders, be the residual claimant, that is, receive a portion of any net earnings of the corporation, and the right to sell the stock.AACSB: Reflective Thinking7.2 How the Market Sets Stock Prices1) In asset markets, an assets price isA) set equal to the highest price a seller will accept.B) set equ

23、al to the highest price a buyer is willing to pay.C) set equal to the lowest price a seller is willing to accept.D) set by the buyer willing to pay the highest price.Answer: DAACSB: Reflective Thinking2) Information plays an important role in asset pricing because it allows the buyer to more accurat

24、ely judgeA) liquidity.B) risk.C) capital.D) policy.Answer: BAACSB: Analytical Thinking3) New information that might lead to a decrease in a stocks price might beA) an expected decrease in the level of future dividends.B) a decrease in the required rate of return.C) an expected increase in the divide

25、nd growth rate.D) an expected increase in the future sales price.Answer: AAACSB: Reflective Thinking4) A change in perceived risk of a stock changesA) the expected dividend growth rate.B) the expected sales price.C) the required rate of return.D) the current dividend.Answer: CAACSB: Reflective Think

26、ing5) A stocks price will fall if there isA) a decrease in perceived risk.B) an increase in the required rate of return.C) an increase in the future sales price.D) current dividends are high.Answer: BAACSB: Reflective Thinking6) A monetary expansion _ stock prices due to a decrease in the _ and an i

27、ncrease in the _, everything else held constant.A) reduces; future sales price; expected rate of returnB) reduces; current dividend; expected rate of returnC) increases; required rate of return; future sales priceD) increases; required rate of return; dividend growth rateAnswer: DAACSB: Reflective T

28、hinking7) The global financial crisis lead to a decline in stock prices becauseA) of a lowered expected dividend growth rate.B) of a lowered required return on investment in equity.C) higher expected future stock prices.D) higher current dividends.Answer: AAACSB: Reflective Thinking8) Increased unce

29、rtainty resulting from the global financial crisis _ the required return on investment in equity.A) raisedB) loweredC) had no impact on D) decreasedAnswer: AAACSB: Reflective Thinking7.3 The Theory of Rational Expectations1) Economists have focused more attention on the formation of expectations in

30、recent years. This increase in interest can probably best be explained by the recognition thatA) expectations influence the behavior of participants in the economy and thus have a major impact on economic activity.B) expectations influence only a few individuals, have little impact on the overall ec

31、onomy, but can have important effects on a few markets.C) expectations influence many individuals, have little impact on the overall economy, but can have distributional effects.D) models that ignore expectations have little predictive power, even in the short run.Answer: AAACSB: Reflective Thinking

32、2) The view that expectations change relatively slowly over time in response to new information is known in economics asA) rational expectations.B) irrational expectations.C) slow-response expectations.D) adaptive expectations.Answer: DAACSB: Analytical Thinking3) If expectations of the future infla

33、tion rate are formed solely on the basis of a weighted average of past inflation rates, then economists would say that expectation formation isA) irrational.B) rational.C) adaptive.D) reasonable.Answer: CAACSB: Analytical Thinking4) If expectations are formed adaptively, then peopleA) use more infor

34、mation than just past data on a single variable to form their expectations of that variable.B) often change their expectations quickly when faced with new information.C) use only the information from past data on a single variable to form their expectations of that variable.D) never change their exp

35、ectations once they have been made.Answer: CAACSB: Reflective Thinking5) If during the past decade the average rate of monetary growth has been 5% and the average inflation rate has been 5%, everything else held constant, when the Federal Reserve announces that the new rate of monetary growth will b

36、e 10%, the adaptive expectation forecast of the inflation rate isA) 5%.B) between 5 and 10%.C) 10%.D) more than 10%.Answer: AAACSB: Reflective Thinking6) The major criticism of the view that expectations are formed adaptively is thatA) this view ignores that people use more information than just pas

37、t data to form their expectations.B) it is easier to model adaptive expectations than it is to model rational expectations.C) adaptive expectations models have no predictive power.D) people are irrational and therefore never learn from past mistakes.Answer: AAACSB: Reflective Thinking7) In rational

38、expectations theory, the term optimal forecast is essentially synonymous withA) correct forecast.B) the correct guess.C) the actual outcome.D) the best guess.Answer: DAACSB: Analytical Thinking8) If a forecast is made using all available information, then economists say that the expectation formatio

39、n is A) rational.B) irrational.C) adaptive.D) reasonable.Answer: AAACSB: Analytical Thinking9) If a forecast made using all available information is NOT perfectly accurate, then it is A) still a rational expectation.B) not a rational expectation.C) an adaptive expectation.D) a second-best expectatio

40、n.Answer: AAACSB: Analytical Thinking10) If expectations are formed rationally, then individualsA) will have a forecast that is 100% accurate all of the time.B) change their forecast when faced with new information.C) use only the information from past data on a single variable to form their forecas

41、t.D) have forecast errors that are persistently low.Answer: BAACSB: Analytical Thinking11) If additional information is not used when forming an optimal forecast because it is not available at that time, then expectations areA) obviously formed irrationally.B) still considered to be formed rationall

42、y.C) formed adaptively.D) formed equivalently.Answer: BAACSB: Analytical Thinking12) An expectation may fail to be rational ifA) relevant information was not available at the time the forecast is made.B) relevant information is available but ignored at the time the forecast is made.C) information ch

43、anges after the forecast is made.D) information was available to insiders only.Answer: BAACSB: Analytical Thinking13) According to rational expectations theory, forecast errors of expectationsA) are more likely to be negative than positive.B) are more likely to be positive than negative.C) tend to b

44、e persistently high or low.D) are unpredictable.Answer: DAACSB: Analytical Thinking14) When using rational expectations, forecast errors will, on average, be _ and _ be predicted ahead of time.A) positive; canB) positive; cannotC) negative; canD) zero; cannotAnswer: DAACSB: Analytical Thinking15) Pe

45、ople have a strong incentive to form rational expectations becauseA) they are guaranteed of success in the stock market.B) it is costly not to do so.C) it is costly to do so.D) everyone wants to be rational.Answer: BAACSB: Reflective Thinking16) If market participants notice that a variable behaves

46、differently now than in the past, then, according to rational expectations theory, we can expect market participants toA) change the way they form expectations about future values of the variable.B) begin to make systematic mistakes.C) no longer pay close attention to movements in this variable.D) g

47、ive up trying to forecast this variable.Answer: AAACSB: Reflective Thinking17) According to rational expectationsA) expectations of inflation are viewed as being an average of past inflation rates.B) expectations of inflation are viewed as being an average of expected future inflation rates.C) expec

48、tations formation indicates that changes in expectations occur slowly over time as past data change.D) expectations will not differ from optimal forecasts using all available information.Answer: DAACSB: Reflective Thinking18) Suppose Barbara looks out in the morning and sees a clear sky so decides t

49、hat a picnic for lunch is a good idea. Last night the weather forecast included a 100% chance of rain by midday but Barbara did not watch the local news program. Is Barbaras prediction of good weather at lunch time rational? Why or why not?Answer: No, this prediction is not using rational expectatio

50、ns. Although Barbara based her guess on the information that was available to her at the time, additional information was readily available that could have been used to improve her prediction.AACSB: Reflective Thinking7.4 The Efficient Market Hypothesis: Rational Expectations in Financial Markets1)

51、The theory of rational expectations, when applied to financial markets, is known asA) monetarism.B) the efficient markets hypothesis.C) the theory of strict liability.D) the theory of impossibility.Answer: BAACSB: Application of Knowledge2) According to the efficient markets hypothesis, the current

52、price of a financial securityA) is the discounted net present value of future interest payments.B) is determined by the lowest successful bidder.C) fully reflects all available relevant information.D) is a result of none of the above.Answer: CAACSB: Reflective Thinking3) If the optimal forecast of t

53、he return on a security exceeds the equilibrium return, thenA) the market is inefficient.B) no unexploited profit opportunities exist.C) the market is in equilibrium.D) the market is myopic.Answer: AAACSB: Analytical Thinking4) Another way to state the efficient markets hypothesis is: in an efficien

54、t marketA) unexploited profit opportunities will be quickly eliminated.B) unexploited profit opportunities will never exist.C) all prices can be accurately predicted.D) every financial market participant must be well informed about securities.Answer: AAACSB: Reflective Thinking5) _ occurs when marke

55、t participants observe returns on a security that are larger than what is justified by the characteristics of that security and take action to quickly eliminate the unexploited profit opportunity.A) ArbitrageB) MediationC) Asset capitalizationD) Market intercessionAnswer: AAACSB: Application of Know

56、ledge6) The efficient markets hypothesis suggests that if an unexploited profit opportunity arises in an efficient marketA) it will tend to go unnoticed for some time.B) it will be quickly eliminated.C) financial analysts are your best source of this information.D) all profits will be eliminated thr

57、ough taxation.Answer: BAACSB: Reflective Thinking7) Financial markets quickly eliminate unexploited profit opportunities through changes in A) dividend payments.B) tax laws.C) asset prices.D) monetary policy.Answer: CAACSB: Analytical Thinking8) The elimination of unexploited profit opportunities re

58、quires that _ market participants be well informed.A) allB) a fewC) zeroD) manyAnswer: BAACSB: Analytical Thinking9) If future changes in stock prices are unpredictable, then we say that the stock prices follow a A) random walk.B) straight and narrow path.C) meandering path.D) generalized walk.Answe

59、r: AAACSB: Application of Knowledge10) When we describe stock prices as following a random walk, we mean that future changes in stock prices areA) unpredictable.B) increasing.C) decreasing.D) constant.Answer: AAACSB: Application of Knowledge11) The efficient markets hypothesis implies that future ch

60、anges in exchange rates should for all practical purposes beA) unpredictable.B) set by each country.C) increasing.D) pegged to a standard such as the U.S. dollar or the Euro.Answer: AAACSB: Application of Knowledge12) According to the efficient markets hypothesis, purchasing the reports of financial