Stocks have a reasonable chance of keeping pace with inflation—but when it comes to doing so, not all equities are created equal. For example, high-dividend-paying stocks tend to get hammered like fixed-rate bonds in inflationary times. 12 Investors should focus on companies that can pass their rising input costs to customers, such as those in the consumer staples sector. Give typing answer with explanation and conclusion
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Stocks have a reasonable chance of keeping pace with inflation—but when it comes to doing so, not all equities are created equal. For example, high-dividend-paying stocks tend to get hammered like fixed-rate bonds in inflationary times. 12 Investors should focus on companies that can pass their rising input costs to customers, such as those in the consumer staples sector.
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- Assume you are using the dividend growth model to value stocks. If you expect the inflation rate to increase, you should also expect: O A. market value of all stocks to remain constant as the dividend growth will offset the increase in inflation. B. stocks that do not pay dividends to decrease in price while dividend paying stocks maintain a constant price. C. market value of all stocks to decrease, all else equal. ype here to search 10:12 10/18/2 PrtSen Home EndThe PE ratio is useful because it measures: O A. how much a stock is expected to earn. O B. how much earnings are going to grow. O C. how much an investor is willing to pay for $1 of earnings. « » AMoving to another question will save this response. co search 10:14 PM 10/18/2021Which of the following is TRUE? a. A bull market is where stocks, on average, are expected to go up in the near future. b. A bull market is the primary market where IPO's are introduced. c. A bull market is a situation where the price of stock in that market has been rising over a fairly long period of time d. A bull market is a market where there are more buyers than sellers, there have been more purchases of stock than sales of stock and a lot of stock is traded every day.
- About Dividend Discount Model (DDM) and stock valuation, which statement is NOT CORRECT? In DDM, the risk-adjusted discount rates should be higher than the corresponding treasury spot rates. Stocks that don't pay dividend, such as, Amazon, Google, Facebook, etc., still have huge value. This contradicts DDM model. Other variables held constant, there is an inverse relation between stock prices and interest rates. By DDM, if a company is expected to never ever pays any cash in the future, its stock should be worth zero.Consider the following information on the returns on stock and bonds investment: Scenario Profitability Stocks Bonds Recession .2 -5% +14% Normal Economy .6 +15% +8% Boom .2 +25% +4% a) Calculate the expected rate of return and standard deviation in each investment. b) Which investment would you prefer? Explain your answer. Show all of your working. Do not use Excel.Which of the following statement is TRUE? O A. Increase in federal reserve funds rate is an example of diversifiable risk. O B. As you add stocks from different companies, we would expect total risk to go down because of a reduction of unsystematic risk. OC. Beta is a measure of unsystematic risk. O D. If you hold stock in a winter clothing company and want to reduce risk through diversification, you should add shares of stock from a snow boots company rather than from an ice cream company.
- Finance Political stability is a major factor of which one of the following? business risk inflation risk country risk exchange rate risk 2. Regarding short selling: which one of the following statements is incorrect? Dividends on any stock sold short must be covered by the short seller. There is no time limit on a short sale. Short sales are permitted only on falling prices or a downtick. Short sellers must put up margin as if they had gone long.Discussion Question on Market Efficiency Consider the following statements from two different investors regarding their strategies for investment. Assuming the stock market is efficient, which investor has the best strategy? Be sure to fully explain your answer. Investor 1 My strategy is to find companies that are undervalued. Because they are undervalued, I representing the overall stock market. I do not expect these companies to experience a lot of growth. And I have been pretty successful at it. About 50% of the time, I am correct in choosing undervalued stock. Investor 2 My strategy is to invest in mutual fund believe I know that much more than all other investors, so the stock price we see in the market is probably a good indicator of the fundamental value of the stock. So there is no use in trying to find undervalued or overvalued stocksHi can you help me with these two problem down below 1. Suppose you observe the following situation: State of Economy Probability of State of Economy Return of Stock A Return of Stock B Bust .15 -.08 -.10 Normal .60 .11 .09 Boom .25 .30 .27 Calculate the expected return on each stock. 2. Indicate whether the following events might cause stocks in general to change price, and whether they might cause Big Widget Corp.’s stock to change price: The government announces that inflation unexpectedly jumped by 2 percent last month. Big Widget’s quarterly earnings report, just issued, generally fell in line with analysts’ expectations. The government reports that economic growth last year was at 3 percent, which generally agreed with most economists’ forecasts. The directors of Big Widget die in a plane crash. Congress approves changes to the tax code that will decreases the top marginal corporate tax rate. The legislation had been debated…
- Q1. A price weighted index places more weight on stocks with a higher price, whilst a value weighted index places more weight on stocks with a higher market capitalization. Discuss. Q2. Price weighted indices have been criticized because they introduce a downward bias by reducing the weight of growing companies whose stock split. What does this mean and why does the underweighting occur? Q3. What should be the risk premium and return on a stock with a Beta of zero under the Capital Asset Pricing Model (CAPM)? What about the risk premium and return on a stock with a Beta of 1? Q4. In a world of certainty, investors will always invest in the asset with the highest return. In the real world, investors hold a diversified portfolio of securities. Why is this the case?You are the CFO of a profitable firm that is financially constrained. The stock market is currently going through a boom phase (assume this is a bubble). From what you have learned in this course, you know that the rational decision would be to issue new shares and use this income to pursue positive NPV projects. Before you make this decision, what is the most important variable that you would examine Assume you have information on all these variables. Select one: O a. Market Q O b. Fundamental Q O c. Elasticity of price demand for common shares O d. Cash SavingsSelect all that are takeaways with respect to risk and return in financial markets that we gleaned from historical data. Group of answer choices In a competitive market, one should expect higher returns for taking on more risk In a competitive market, one will earn a higher return if they take on more risk Individual stocks and portfolios (of those individual stocks), by definition, exhibit the same risk-return trade offs We use historical data to quantify the risk-return relation because we know this same relation will hold in the future