Financial Markets Assignment

Financial Markets Assignment

34. If financial markets were efficient (close to the perfect competition market), at equilibrium:

a) The fundamental value of a stock in this market would equal the present value of its future dividends

b) The price of a financial asset would equal its present value

c) The NPV of an investment in financial assets would equal 0

d) All of the above

35. If financial markets were efficient (close to the perfect competition market). At equilibrium, a investor buying a stock should expect:

a) A Null Net Present Value from the investment.

b) A Null return from the investment.

c) A return from the investment lower than the opportunity cost of capital.

d) All of the above

36. AS Inc. has an issue of preferred stock outstanding that pays $3 dividend every year, in perpetuity If this issue currently sells for $50 per share and financial markets are efficient. At equilibrium:

a) Its expected return is R =D/Po $3/$50

b) The stock can be valued in the long term by discounting its dividends

c) The value of the stock is $50.

d) All of the above. to maintain a constant 5 per cent growth rate

37. BETA Inc. just paid a dividend of $2.5 and pledges in dividends forever. If the required return on the stock is 13% and financial markets are efficient. At equilibrium, the current share price is:

a) Po 2.5 (1+0.05)/0.13

b) Po 2.5 (1+0.05)/(1+0.13)

c) Po 2.5 (1+0.05)/(0.13-0.05)

d) Po 2.5/(0.13-0.05)

Financial Markets Assignment


Financial Markets Assignment

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