Applying the valuation procedure to common stocks is more difficult than applying it to bonds because:
A) the size and timing of the dividend cash flows are less certain than the coupon payments for bonds.
B) common stocks have no final maturity date.
C) unlike the rate of return, or yield, on bonds, the rate of return on common stock is not directly observable.
D) All of the above are true.

Question

Quizplus · Accepted Answer

All of the options are true. The valuation of common stocks is more challenging than that of bonds because the size and timing of the dividend cash flows may not be well-known, common stocks lack a final maturity date, and determining a direct observable rate of return or yield on common shares is difficult.

Applying the Valuation Procedure to Common Stocks Is More Difficult