th model, the capital sains yield is the same as the dividend Bonds mature, stoc
ID: 2787621 • Letter: T
Question
th model, the capital sains yield is the same as the dividend Bonds mature, stocks do not High P-E ratios are usually associated with high-growth stocks stocks are generally less risky than bonds. 10. 11· 12. According to the constant dividend growth model, the dividend yield is the same as the capital gains yield 13. Cash flows to stockholders are promised, cash flows to bondholders are not. 14. The dividend yield must always be positive. 15. 16· The value of a share of stock is equal to the price plus the future value of the dividends. The value of a share of stock is equal to the future value of the dividend payments plus the future price. 17· A stock that does not pay dividends MUST have a lower price than a stock that pays dividends. 18. The dividend yield can never be negative. 19· The value of a share of stock is equal to the present 20. The TOTAL value of a company's stock is equal to the price per share times the number of value of all future cash flows related to the stock. According to the constant dividend growth model, the constant growth rate is the same as 22- outstanding 21. yield A stock with a P-E of 20 and a PEG of 1 is a better value than a stock with a PE of 1 and a PEG of 20.Explanation / Answer
9) The correct choice is True
Explanation : - Corporate stocks are perpetuities and they do not have a maturity date.
10) The correct choice is True
Explanation : - Stocks with high PE ratios are growth companies and the growth will deliver the excess returns in the future.
11) The correct choice is false
Explanation : - Investors know what they're likely going to get when they buy a bond, hence bonds are less risky than stocks.
12) The correct choice is false
Explanation : - According to the constant dividend growth model, the price of the stock is calculatd as
P = D / r - g
where r = dividend yield and g is the capital gains yield
if r = g , the price of the stock cannot be determined.
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