Reference no: EM131864251

Which of the following statements is incorrect?

(a) A stock price is a discounted sum of future dividends.

(b) Assuming that the issuing corporation is a going concern, a preferred stock (in its most basic form) is an example of perpetuity.

(c) A preferred stock (in its most basic form) is an example of a zero growth dividend pattern.

(d) In equilibrium, a stockís required rate of return must be higher than its expected rate of return.

2.  Which of the following statements is incorrect?

(a) According to the Pure Expectations Theory, that yield curve should be typical.

(b) The Pure Expectations Theory asserts that the yield curve is explained solely by investorsíinterest rate expectations.

(c) According to the Liquidity Preference Theory, short term interest rates are higher than long term interest rates because they contain positive maturity premiums.

(d) None of the above statements are incorrect. (All of the above statements are correct.)