Assume Stocks a and B Have Had Identical Stock Prices

question 74

Multiple Choice

Assume stocks A and B have had identical stock prices every day for the past 3 years.Stock A pays a dividend but Stock B does not.Which one of these statements applies to these stocks for the last 3 years?

• A)Their annual total rates of return are equal.
• B)Stock A's total return has been higher than Stock B's every year.
• C)Stock B's capital gain has exceeded Stock A's every year.
• D)Stock A's total return had to be positive every year.
• E)Stock B's holding period return exceeded that of Stock A.

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Definitions:

Callable Bonds

Securities that the issuer has the option to repurchase prior to their due date at a predetermined price.

Bond Indenture

A legal contract between a bond issuer and a bondholder that details the terms of the bond, such as the coupon rate, maturity date, and obligations of the issuer.

Bond Premium

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

Semiannual Interest

Interest on a loan or security that is calculated and paid twice a year.