The Value of Common Stock Can Be Viewed As

question 69

Multiple Choice

The value of common stock can be viewed as:

• A)A dividend stream plus a market price at the end of the dividend stream
• B)A present value of a dividend stream plus a market price at the end of the dividend stream
• C)The terminal value of the dividend stream
• D)The sum of the dividend stream taken to infinity

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Definitions:

Low Default Risk

A classification for bonds or other forms of debt that are deemed to have a minimal chance of the issuer failing to make the required payments.

Money Market

The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities are traded, intended for short-term borrowing and lending.

Transaction Motive

The need to hold cash to satisfy normal disbursement and collection activities associated with a firm’s ongoing operations.

Liquidity

Measures the ease with which an asset can be converted into cash without significantly affecting its price.