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Question 817  expected and historical returns, income and capital returns

Over the last year, a constant-dividend-paying stock's price fell, while it's future expected dividends and profit remained the same. Assume that:

  • Now is ##t=0##, last year is ##t=-1## and next year is ##t=1##;
  • The dividend is paid at the end of each year, the last dividend was just paid today ##(C_0)## and the next dividend will be paid next year ##(C_1)##;
  • Markets are efficient and the dividend discount model is suitable for valuing the stock.

Which of the following statements is NOT correct? The stock's:




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