Econ Quiz

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Question 11 pts

Let Rt be the yield on debt at time t, ex Dt+1 be the expected dividend payment and ex Pt+1 be the expected price of the stock at time t+1, and Pt is the current price of the stock. Then Rt = (ex Dt+1 + ex Pt+1 – Pt)/Pt is

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If the interest rate is rising and stock prices are simultaneously rising, then according to the fundamental theory of stock pricing

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Consider the stable growth or steady state model of a stock price. If the price of the stock is $40 per share, the yield on the relevant bond is 6%, and the growth rate of dividends is expect to be 4%, then the current dividend growth rate will be (do not use a $, so 1.13, not $1.13)

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Suppose everyone believes that an increase in the unemployment rate will lower dividend payments in the future. Suppose a week from tomorrow when the BLS announces the unemployment rate for March, it announces an increase, but stock prices do not change. Then this is evidence that

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Assume the fundamental value theory of stock pricing holds. If you are a rational investor, and you own shares of Cintas stock, then