Asked by Diego Dulanto on Jun 21, 2024
Verified
If two firms have the same current dividend and the same expected dividend growth rate,their stocks must sell at the same current price or the market will not be in equilibrium.
Market Equilibrium
Market equilibrium is a condition where supply equals demand for a product, resulting in stable prices.
Dividend Growth Rate
The annual rate at which the dividends paid by a stock is expected to grow.
- Familiarize oneself with how the marginal investor impacts the determination of stock prices.
- Interpret the core concept of market equilibrium and its implications for investment actions.
Verified Answer
JD
Jerulyn DizonJun 23, 2024
Final Answer :
False
Explanation :
Stock prices are influenced by a variety of factors beyond current dividends and expected growth rates, including risk, market conditions, and investor perceptions, which can lead to different stock prices even with similar dividends and growth expectations.
Learning Objectives
- Familiarize oneself with how the marginal investor impacts the determination of stock prices.
- Interpret the core concept of market equilibrium and its implications for investment actions.