In the One-Period Valuation Model,a Stock's Value Will Be Higher

question 65

Multiple Choice

In the one-period valuation model,a stock's value will be higher

• A) the higher its expected future price is.
• B) the lower its dividend is.
• C) the higher the required return on investments in equity is.
• D) all of the above.

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Definitions:

Risk-Free Rate

The rate of return on an investment with no risk of financial loss, often represented by the yield on government Treasury bills.

Expected Market Rate

The forecasted rate of return anticipated by investors in the financial markets, based on current conditions and future projections.

Risk Premium

The extra return above the risk-free rate that investors require to hold a risky investment.

Reward-To-Risk Ratio

A metric utilized in financial analysis to evaluate the potential returns of an investment against the level of risk incurred to achieve those returns.