According to the basic stock valuation model

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Reference no: EM131556306

Which of the following statements is INCORRECT?

a. There is an inverse relationship between bond ratings and the required return on a bond. The required return is lowest for AAA rated bonds, and required returns increase as the ratings get lower (worse).

b. One advantage of using common stock as a source of funds is that common stock does not legally obligate the firm to make payments to stockholders.

c. According to the basic stock valuation model, the value an investor assigns to a share of stock is dependent upon the length of time the investor plans to hold the stock.

d. Although common stock represents a riskier investment to an individual than do bonds, in the sense of exposing the firm to the risk of bankruptcy, bonds represent a riskier method of financing to a corporation than does common stock.

Reference no: EM131556306

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