A. the same amount to every investor regardless of their desired rate of return.
B. the present value of the future income which the stock generates.
C. an amount computed as the next annual dividend divided by the market rate of return.
D. the same amount as any other stock that pays the same current dividend and has the same required rate of return.
E. an amount computed as the next annual dividend divided by the required rate of return.
2. Assume that you are using the dividend growth model to value
stocks. If you expect the market rate of return to increase across
the board on all equity securities, then you should also expect
A. market values of all stocks to increase, all else constant.
B. market values of all stocks to remain constant as the dividend growth will offset the increase in the market rate.
C. market values of all stocks to decrease, all else constant.
D. stocks that do not pay dividends to decrease in price while the dividend-paying stocks maintain a constant price.
E. dividend growth rates to increase to offset this change.
3. The total rate of return earned on a stock is comprised of which
two of the following?
I. current yield
II. yield to maturity
III. dividend yield
IV. capital gains yield
A. I and II only
B. I and IV only
C. II and III only
D. II and IV only
E. III and IV only
4. The value of common stock today depends on:
A. the expected future holding period and the discount rate.
B. the expected future dividends and the capital gains.
C. the expected future dividends, capital gains and the discount rate.
D. the expected future holding period and capital gains.
E. None of the above.