Finance Exam 1 |Chapters 1,2,3,4,&5 homework Pearson Questions
Which of the following are reasons that make valuing a share of stock more difficult than valuing a bond? ** Answ** -Dividends are unknown and uncertain
-The required rate of return is unobservable
-Stock has no set maturity
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Finance Exam 1 |Chapters 1,2,3,4,&5 homework
Pearson Questions
Which of the following are reasons that make valuing a share of stock more difficult than
valuing a bond? ** Answ** -Dividends are unknown and uncertain
-The required rate of return is unobservable
-Stock has no set maturity
P0 = (D1 + P1)/(1 + __) ** Answ** R
Match the following terms relating to stock valuation:
P1
D1
R
P0
D0 ** Answ** -Price in one year
-Next expected dividend
-Discount Rate
-Price today
-Dividend just paid
Which one of the following is true about dividend growth patterns? ** Answ**
Dividends may grow at a constant rate.
What information do we need to determine the value of a stock using the zero growth
model? ** Answ** -Dividend
-Discount rate
True or false: Common stock has a set maturity. ** Answ** False
P1 = (__ + P2)/(1 + R) ** Answ** D2 (little 2)
The price of a share of common stock is equal to the present value of all ______ future
dividends. ** Answ** Expected
The constant-growth model assumes that _________. ** Answ** dividends change
at a constant rate
Three special case patterns of dividend growth discussed in the text include: **
Answ** -non-constant growth
-constant growth
-zero growth
Which of the following represents the valuation of stock using a zero growth model? **
Answ** Dividend/Discount rate = D/R
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