In the Constant Growth Model, the Return on a Stock

question 59

Multiple Choice

In the constant growth model, the return on a stock can be shown to be equal to the sum of the dividend yield plus the:

• A)growth rate.
• B)cost of capital.
• C)present value yield.
• D)yield-to-maturity.

---

Definitions:

Principle of Diversification

A risk management strategy that mixes a wide variety of investments within a portfolio to minimize risks.

Efficient Market

A financial market theory stating prices fully reflect all available information, making it impossible to consistently achieve higher returns.

Concentrating Investment

Allocating a significant portion of an investment portfolio to a single investment or a small group of investments, increasing potential risk and return.

Systematic Risk Principle

The concept that the overall market or economy has inherent risks that affect all investments to some degree, and these risks cannot be eliminated through diversification.