The current share price of a corporation's stock is determined by the
A) original purchase price multiplied by 1 plus the interest rate.
B) present value of capital gains and dividends received by stock owners.
C) expected interest and dividend payments.
D) expected capital gains and dividends prospective buyers will earn.

Question

Quizplus · Accepted Answer

The current share price of a corporation's stock is determined by the expected capital gains and dividends that prospective buyers will earn. This market expectation is influenced by various factors such as economic conditions, performance of the industry and the corporation, future growth prospects, and investor sentiment. It is this perception of future value that determines the stock price, as buyers and sellers come to a consensus on what the fair market value of the stock is at any given time. The other options (A, B, and C) are not accurate as they do not reflect the true determinants of stock prices.

The Current Share Price of a Corporation's Stock Is Determined