Which of the following statement is FALSE? A. Dividend valuation with a constant

Question

Which of the following statement is FALSE?

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

B. 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.

C. 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.

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

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

Explanation / Answer

A. Dividend valuation with a constant growth model is similar to a growing perpetuity problem. This statement if false.

#In case of dividend valuation model with constant growth, the dividend stream does not happen forever, while in case of growing perpetuity, the dividends are assumed to be declared forever.

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