the economics of money, banking, and financial markets

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20. 
    

    In the generalized dividend model, a future sales price far in the future does not affect the
    current stock price because ____.
    A) the present value cannot be computed
    B) the present value is almost zero
    C) the sales price does not affect the current price
    D) the stock may never be sold
    Answer: B
    Diff: 2 Type: MC Page Ref: 139
    Skill: Recall
    Objective List: 7.1 Illustrate how stocks are valued as the present value of dividends

    
    


21. 
    

    In the generalized dividend model, the current stock price is the sum of ____.
    A) the actual value of the future dividend stream
    B) the present value of the future dividend stream
    C) the future value of the future dividend stream
    D) the present value of the future sales price
    Answer: B
    Diff: 2 Type: MC Page Ref: 139
    Skill: Recall
    Objective List: 7.1 Illustrate how stocks are valued as the present value of dividends

    
    


22. 
    

    Using the Gordon growth model, a stock's price will increase if ____.
    A) the dividend growth rate increases
    B) the growth rate of dividends falls
    C) the required rate of return on equity rises
    D) the expected sales price rises
    Answer: A
    Diff: 2 Type: MC Page Ref: 140
    Skill: Recall
    Objective List: 7.1 Illustrate how stocks are valued as the present value of dividends

    
    


23. 
    

    In the Gordon growth model, a decrease in the required rate of return on equity ____.
    A) increases the current stock price
    B) increases the future stock price
    C) reduces the future stock price
    D) reduces the current stock price
    Answer: A
    Diff: 2 Type: MC Page Ref: 140
    Skill: Applied
    Objective List: 7.1 Illustrate how stocks are valued as the present value of dividends