When a company decreases its dividend does its stock price increase?
(b) an increase in the stock price when a company decreases its dividend is consistent with signaling theory as postulated by MM (c) if the "clientele effect" is correct, then for a company whose earnings fluctuate, a policy of pay a constant percentage of net income will probably maximize stock price
What is most likely to push the price of a stock higher?
What is most likely to push the price of a company's stock higher? an increase in demand for the company's stock Buying a bond is similar to which of the following? giving a loan What kind of goods are sold in the commodity market?
What are the factors affecting the cost of money?
One of the four most fundamental factors that affect the cost of money as discussed in the text is the availability of production opportunities and their expected rates of return. If production opportunities are relatively good, then interest rates will tend to be relatively high, other things held constant.
Does issuance of new common stock increase or decrease the dividend payout ratio?
if a firm adheres strictly to the residual dividend policy, the issuance of new common stock would suggest that (a) the dividend payout ratio is increasing (b) no dividends were paid during the year (c) the dividend payout ratio is decreasing
What are the factors that affect the cost of money?
The four most fundamental factors that affect the cost of money are (1) production opportunities, (2) time preferences for consumption, (3) risk, and (4) inflation. Because the maturity risk premium is normally positive, the yield curve is normally upward sloping. a.
What happens if the maturity risk premium is greater than zero?
If the maturity risk premium (MRP) is greater than zero, the Treasury bond yield curve must be upward sloping. b. Because long-term bonds are riskier than short-term bonds, yields on long-term Treasury bonds will always be higher than yields on short-term T-bonds.