Question

Which one is true which one is false,why?

An investor will be willing to pay up to the point at which the current price of a share of stock equals the present value of the expected future dividends an expected future sale price. ..

B) The expected total return of a stock should equal the expected return of other investments available in the market with equivalent risk

Answer 1

A )  

An investor will be willing to pay up to the point at which the current price of a share of stock equals the present value of the expected future dividends an expected future sale price. : TRUE as stock price is nothing but present value of future dividends discounted at required rate of return .

B)

The expected total return of a stock should equal the expected return of other investments available in the market with equivalent risk : FALSE as total return on the stock is dividend yield + growth or appreciation on the stock.