Which of the following statements about a share with a flat fundamental value is correct?
A) A share with a flat fundamental value implies that the share is rendered valueless at the end of the trading period.
B) A flat fundamental value is a way of approximating a share that is short-lived such as shares in a business dealing with a non-renewable resource such as mining.
C) A flat fundamental value implies that the time-path of expected dividends can be represented by a horizontal straight line.
D) A flat fundamental value implies that the share prices will not exhibit the bubble and crash pattern that we see for shares with declining fundamental value.

Question

Quizplus · Accepted Answer

A flat fundamental value implies that the expected dividends from the share are constant over time, hence the representation by a horizontal line. This does not necessarily relate to the share being valueless, short-lived, or immune to bubbles and crashes.

Which of the Following Statements About a Share with a Flat