Asked by Jalen Taylor on Jul 26, 2024
Verified
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.
Verified Answer
SB
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.
Learning Objectives
- 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.
Related questions
It Is More Difficult to Value a Stock Than It ...
A Firm Has Common and Preferred Stock Outstanding, Both of ...
The West Division of Cecchetti Corporation Had Average Operating Assets ...
The Minimum Return That Will Make an Investment Acceptable to ...
All Other Things Being Equal, a Company's Return on Investment ...