Author Question: Berg Inc. has just paid a dividend of 2. Its stock is now selling for 48 per share. The firm is half ... (Read 49 times)

jho37 · **on:** Jul 10, 2018

Berg Inc. has just paid a dividend of 2. Its stock is now selling for 48 per share. The firm is half as risky as the market. The expected return on the market is 14,

and the yield on U.S. Treasury bonds is 11. If the market is in equilibrium, what rate of growth is expected?
A) 13
B) 10
C) 4
D) 8
E) -2

Question 2

In regards to the fact that the pricing of stocks is more difficult than the pricing of bonds, which of the below statements is FALSE?

A) Cash dividends, unlike coupons for bonds, typically change from year to year.
B) The ending price of the stock at any point in time is not fixed like the par value of the principal.
C) Because a stock has no maturity date, the number of its payments are unknown.
D) A stock's final sale is fixed in time on its maturity date.

shailee · **Reply #1 on:** Jul 10, 2018

Answer to Question 1

D

Answer to Question 2

Answer: D
Explanation: D) Technically, a stock does not have a maturity date like a bond. Thus, the final sale of a stock by an investors is NOT fixed in time on a maturity date. An investor is free to choose his or her own selling point in time, and the point in time is not limited by a maturity date.