Does secondary market trading generate capital for the company whose stock is trading?
Answer to relevant QuestionsThe value of common stocks cannot be tied to the present value of future dividends because most firms don’t pay dividends. Comment on the validity, or lack thereof, of this statement. Suppose a preferred stock pays a quarterly dividend of $2 per share. The next dividend comes in exactly one-fourth of a year. If the price of the stock is $80, what is the effective annual rate of return that the stock ...Suppose nominal bond returns approximately follow a normal distribution. Using the data in Table, construct a range that should contain 95 percent of historical bond returns. Next, refer to Figure. Is the number of years ...The following data shows the rate of return on stocks and bonds for several recent years. Calculate the risk premium on equities vs. bonds each year, and then calculate the average risk premium. Do you think at the beginning ...If prices move almost at random, then why should we place any value on the CAPM, which makes predictions about expected asset returns?
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