441. Which of the following is the correct expression for the percentage return on a share?
A. Rt = (dt + Pt – Pt-1)/Pt-1
B. Rt = (dt + Pt – Pt-1)
C. Rt = (dt + Pt – Pt-1)/ dt
D. Rt = (-dt – Pt + Pt-1)/Pt-1

442. Which of the following is not one of the qualities which makes debt attractive to firms?
A. The cost of debt is generally less than the cost of share capital and hence can lower the overall cost of capital for a firm.
B. Debt interest only gets paid when the company is making a profit.
C. It reduces the amount of corporate tax payable by firms by reducing the amount of taxable profit.
D. The required return on debt is lower because, from the lender’s point of view, debt is less risky than equity.

443. Which of the following is not a money market instrument?
A. Bonds.
B. Treasury bills.
C. Certificates of deposit (CDs).
D. Commercial paper (CP).

444. Which of the following is not a defining quality of a bond?
A. Dividend yield.
B. Maturity.
C. Face value.
D. Coupon payment frequency.

445. What is the value of a 6%, five year bond with annual coupons and face value equal to £1,000, if the current yield to maturity is 6%?
A. £1,089
B. £920
C. £1,200
D. £1,000

446. As which type of cash flow is an equity share usually valued?
A. An annuity cash flow.
B. A risk-free cash flow.
C. A perpetuity cash flow.
D. An erratic cash flow.

447. Under which of the following market efficiency regimes would technical analysis not generate abnormal returns?
A. Weak market efficiency.
B. Semi-strong market efficiency.
C. Strong form market efficiency.
D. All three.

448. Which of the following is not one of the three fundamental methods of firm valuation?
A. Discounted cash flow.
B. Income or earnings – where the firm is valued on some multiple of accounting income or earnings.
C. Balance sheet – where the firm is valued in terms of its assets.
D. Market share.

449. Which of the following represents the correct formula for valuing a share with a growing dividend?
A. Pt = d0 × (1 – g)/(r – g)
B. Pt = d0 × (1 + g)/(r + g)
C. Pt = d0 × (1 + g)/(r – g)
D. Pt = d1 × (1 + g)/(r – g)

450. If you are using a dividend valuation approach, how is supernormal dividend growth dealt with for valuation purposes?
A. The period of supernormal growth should be dealt with separately on a year by year basis.
B. The formula Pt = d0 × (1 + g)/(r – g) can be applied.
C. The formula Pt = d1 × (r – g) can be applied.
D. The formula g = ROE × b can be applied.

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