The fundamental value of a share of stock is equal to which of the following?
A)the sum of expected dividends
B)the present value of expected dividends
C)the sum of coupon payments
D)the present value of coupon payments
E) the present value of the expected yield

Question

Quizplus · Accepted Answer

The fundamental value of a share of stock is based on its expected future dividends. Therefore, the present value of those expected future dividends would be the most accurate measure of the stock's fundamental value. Choices A and C are incorrect because they only consider the sum of expected or actual dividends, without discounting for time value of money. Choices D and E are incorrect because coupon payments and yield are more appropriate measures for bonds, not stocks.

The Fundamental Value of a Share of Stock Is Equal