Question

Shortcomings of the dividend pricing models suggest that we need a pricing model that is more inclusivethan the dividend models and provides expected returns for companies based on aspects besides their historical dividend patterns.
Which of the below is NOT one of these aspects?


A) The company's risk

B) The premium for taking on risk

C) The reward for waiting

D) Stable dividends

Answer 1

Answer: D. Stable dividends

Explanation:

The dividend model in not inclusive as the pricing model. So what we need is a pricing model that has more inclusive than the dividend model and it can also estimate the expected returns for the stocks with no need for a stable dividend history. The capital asset pricing model (CAPM) has inclusiveness and provides expected returns for companies or firm based on (1) their risk, (2) the reward for waiting and not on their historical dividend patterns and (3) the premium for taking on risk

Answer 2

Answer:

D. Stable dividends

Explanation:

we need a pricing model that is more inclusive than the dividend model in that it can estimate expected returns for stocks without the need for a stable dividend history. The capital asset pricing model is more inclusive and provides expected returns for companies based on (1) their risk, (2) the premium for taking on risk, and (3) the reward for waiting, and not on their historical dividend