Applying the Valuation Procedure to Common Stocks Is More Difficult

question 1

Multiple Choice

Applying the valuation procedure to common stocks is more difficult than applying it to bonds because:

• A) the size and timing of the dividend cash flows are less certain than the coupon payments for bonds.
• B) common stocks have no final maturity date.
• C) unlike the rate of return, or yield, on bonds, the rate of return on common stock is not directly observable.
• D) All of the above are true.

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