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- Question 4 A. Contrast the nominal rate of interest with the real rate of interest. B. Why would “a belief in the segmented markets theory of the term structure” implies “a belief in market inefficiency”. C. Suppose you purchased a stock at the end of 2017 and sold it at the end of 2019. The year-end stock prices are shown below and the stock paid no dividends. 2017 2018 2019 $100 $112 $100 (i). Compute the average annual return according to the arithmetic mean method. (ii). Compute the average annual return according to the geometric mean method. (iii). Compare the results in (i) and (ii), and indicate which is more intuitively appealing in assessing the performance of your investment. Question 5 A. What does it mean to say that a bond has a value less than one for its relative yield differential? What might account for such a difference? B. Why is the maturity of some bonds ambiguous? C. Assume the following characteristics for a particular bond: Face…Question Help ▼ According to the Generalized Dividend Model, the final sales price of a stock depends on the following except the O A. price of the stock in the last period. OB. number of periods. OC. required retum on investments in equity. O D. dividend payments. If a company called Advanced Technologies has yet to pay a dividend on its stock, the generalized dividend model predicts that the company's stock may still have value because O A. people expect Advanced Technologies to pay dividends in the future. B. all companies that have any physical assets have value. OC. the required return on investment for high technology companies is zero. O D. all companies are legally required to pay dividends within ten years of the initial public offering of stock. Click to select your answer.When a company goes public, it declares what its dividend will be so investors know what their annual income will be. Question 16 options: True False
- a. How would a firm’s decision to pay out a higher percentage of its earnings as dividendsaffect each of the following?1. The value of its long-term warrants2. The likelihood that its convertible bonds will be converted3. The likelihood that its warrants will be exercisedb. If you owned the warrants or convertibles of a company, would you be pleased or displeasedif it raised its payout rate from 20% to 80%? Why?4 a. Investors will only invest in a stock if it gives a higher return than they could get elsewhere. Therefore, if a stock is fairly priced, its expected return will be greater than the cost of equity capital. Skipped O False True b. A stock that is expected to pay a level dividend in perpetuity has value of Po=DIV₁/r. Any company that can reinvest to grow its earnings will have a greater value. O False True c. The dividend discount model is still logically correct even for stocks that do not currently pay a dividend. False True29 Which one of the following statements is correct? A The dividend growth model can be used to compute the current value of any stock. B. Preferred stocks have constant growth dividends C. A constant dividend stock cannot be valued using the dividend growth model. D. The capital gains yield is the annual rate of change in a stock's price O A D O B O U
- 16Suppose a stock is not currently paying dividends, and its management has announced that it will not pay a dividend for several years, but that it does expect to start paying dividends sometime in the future. Under these conditions, which of the following statements is most correct? Group of answer choices Such a stock should have a value of zero until it actually begins paying dividends. Under these conditions, we can estimate a value for the stock, but we cannot use any form of the constant growth DCF model to do so. Since it is expected to someday pay dividends, the value of the stock today can be found with this equation: P0 = D1/(r - g). The value of the stock can be found using DCF procedures by finding the present value of expected future dividends accounting for their timing and amount.A. What is the investor's required rate of return for Green Gadgets' stock? ________% (round to two decimal paces) B. Assuming that the investor's required rate of return for Green Gadget's stock does not change, what would you expect to happen to the price of its common stock if it cuts dividend to $3? $_______ (round to the nearest cent) C. Should Green Gadgeds cut its dividend? ( select from the drop down menus) Green Gadgets Should / Should not cut the dividend because cutting the dividend will increase / decrease the value of the common stock.23. Suppose a stock is not currently paying dividends, and its management has announced that it will not pay a dividend for several years, but that it does expect to start paying dividends sometime in the future. Under these conditions, which of the following statements is most correct? a. The value of the stock can be found using DCF procedures by finding the present value of expected future dividends accounting for their timing and amount. b.Since it is expected to someday pay dividends, the value of the stock today can be found with this equation: P0 = D1/(r - g). c. Under these conditions, we can estimate a value for the stock, but we cannot use any form of the constant growth DCF model to do so. d. Such a stock should have a value of zero until it actually begins paying dividends.
- Question 5 The issue as to whether dividend policy has an effect on share prices raises a question as to whether dividends paid out to stockholders are any more “certain” than the expected future dividends the stockholders hope to receive from retention of firm earnings. This is known as the bird-in-the-hand theory of dividend policy. Do you agree with this theory? Explain.Question 6 According to the Capital Asset Pricing Model (CAPM), underpriced securities: A) above the SML B under the SML C expected return will rise D share price will fall 1To increase the return on equity, a bank can (more than one answer) Question 15 options: retire stocks. sell stocks. decrease dividend. increase dividend. increase retained earnings. decrease retained earnings.