The Two Most Popular Discounted Earnings Models Appear to Be

question 41

Multiple Choice

The two most popular discounted earnings models appear to be

• A) Free cash flow and dividend discount model.
• B) Sales/market capitalization and price-earnings.
• C) Discounted abnormal earnings and residual income.
• D) Price-cash flow and dividend discount.

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Definitions:

Bond Certificate

A physical document representing the investor's right to receive the principal and interest from a bond issuer.

Semiannual Interest

Interest that is calculated and paid twice a year, often on a bond or loan.

Bond Premium

The amount by which the market price of a bond exceeds its face value, usually occurring when the bond's interest rate is higher than the current market rate.

Straight-line Method

An accounting method of depreciating fixed assets where the asset's cost is evenly distributed over its useful life to allocate the expense of the asset over its lifespan.