Asked by Jalen Taylor on Jul 26, 2024

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Explain whether it is easier to find the required return on a publicly traded stock or a publicly traded bond, and explain why?

Publicly Traded Stock

Stocks that are listed on a stock exchange, allowing investors to buy and sell shares to the general public.

Publicly Traded Bond

A bond that is traded in the public securities markets, allowing investors to buy and sell the bond before its maturity date.

  • Identify the difficulties involved in comparing the valuation of stocks and bonds, along with the elements that make estimating stock values more complex.
  • Elucidate the constituents of expected return and the manner in which they affect decisions regarding investments.
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Solomon BanguraJul 27, 2024
Final Answer :
Bonds, unlike stocks, have a final maturity date and promised payments at fixed periods of time. For stocks, the only valuation model we have up to this point in the text is the dividend growth model which requires estimation of a dividend growth rate and also requires that certain conditions be met before the dividend growth model can be applied. Normally, all of the information required to find the yield on a publicly traded bond is publicly available while only the price and most current dividend are available for stocks.