Which of the Following Statements Is FALSE

question 34

Multiple Choice

Which of the following statements is FALSE?

• A)The equity cost of capital for a stock is the expected return of other investments available in the market with equivalent risk to the firm's shares.
• B)The price of a share of stock is equal to the present value of the expected future dividends it will pay.
• C)If the current stock price were less than P0 = ,it would be a negative NPV investment,and we would expect investors to rush in and sell it,driving down the stock's price.
• D)The law of one price implies that to value any security,we must determine the expected cash flows an investor will receive from owning it.

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Definitions:

Participant Expectancy

The phenomenon where a participant's expectations or beliefs influence or bias the outcome of an experiment.

Double-Blind

A type of study or clinical trial design in which neither the participants nor the experimenters know who is receiving a particular treatment, to prevent bias.

Correlation

A statistical measure that indicates the extent to which two or more variables fluctuate together.

Ex Post Facto

A research design that examines the effects of an independent variable on a dependent variable after the event has occurred.