Question

1A)

Which statements are CORRECT?

Check all that apply:

a) Shortselling is a lot riskier than regular ‘buy and sell’.

b) The immediate market reaction to cash dividend distribution is the company’s stock declining

c) By paying cash dividend, the true value per share of the firm decreases by the cash dividend amount per share

d) Shortsales make stock prices more informative

e) Security and Exchange Commission (SEC) prohibit shortselling

f) Shortselling is one of the mechanisms that keep the market efficient

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1B)

Which statements are CORRECT?

Check all that apply:

a) Stocks that don't pay dividend, such as, Amazon, Google, Facebook, etc., still have huge value. This contradicts DDM model

b) In DDM, the risk-adjusted discount rates can be replaced with treasury spot rates

c) Shareholder's total return comes from two sources only: dividend and capital gain

d) GE recently announced the news to cut future dividend. The plan hardly affects its current stock price

e) By Dividend Discount Model (DDM), if a company never ever pays any cash in the future, its stock should be worth zero

f) NYSE is a primary market

g) In DDM, the stock price is called ex-dividend price because it is the price before current dividend is paid out

Answer 1

Ans for 1A)-->e) Security and Exchange Commission (SEC) prohibit shortselling

1B) c) Shareholder's total return comes from two sources only: dividend and capital gain