Which of the following statement is FALSE? A. If coupon rate is lower than its y

Question

Which of the following statement is FALSE?

A.            If coupon rate is lower than its yield to maturity, then the bond would sell at a discount. <true

B.            Stock valuation models depend on all past and future dividend payments. ?

C.            Yield to maturity reflects the current market rate and it is the appropriate discount rate that matches the present value of the bond's cash flow stream and price of a bond. <true

D.            The faster you pay off of mortgage, the more you save on interest; this is one of the advantages of paying off a loan earlier. <true

E.            Dividend valuation with a constant growth model is similar to a growing perpetuity problem. ?

Explanation / Answer

Answer is Statement B

Stock valuation models only take future dividend payments into account but not past dividend payments

In case of Gordon growth model, stock can be valued as

Price = D1 / (K-g)

Here g is constant growth to perpetuity, so statement E is true

All the remaining statements are True as you have already pointed out.

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