Use the Following Two Statements to Answer This Question

question 28

Multiple Choice

Use the following two statements to answer this question:
I.The Dividend Discount Model (DDM) assumes that common shares are valued according to the present value of their expected future dividends.
II.The DDM argues that the selling price at any point (say, time n) will equal the present value of all the expected future dividends from period n to infinity.

• A)I is incorrect, II is correct.
• B)I is correct, II is incorrect.
• C)I and II are incorrect.
• D)I and II are correct.

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Definitions:

Primacy Effect

The tendency to remember information at the beginning of a list better than the information that follows.

Halo Effect

A cognitive bias in which the perception of one positive characteristic of a person influences the overall perception of them as favorable.

Phi Phenomenon

An optical illusion of perceived motion created by the rapid succession of images or objects.

Recency Effect

The tendency to remember the most recently presented information best, compared to earlier information.