Question

Explain why historical stock and bond returns likely overstate the stock and bond returns you should expect in the future. In your analysis, consider factors such as current factors such as current and historical dividends, interest rates, and P/E ratio

Answer 1

1) EXPLAIN WHY HISTORICAL STOCK AND BOND RETURNS LIKELY OVERSTATE THE STOCK AND BOND RETURNS YOU SHOULD EXPECT IN THE FUTURE,IN YOUR ANALYSIS CONSIDER FACTORS SUCH AS CURRENT FACTORS SUCH AS CURRENT AND HISTORICAL DIVIDENDS,INTEREST RATES,AND P/E RATIO?

A) Lets first check out the difference between both stock and bond to understand the things better and clear
DIVIDEND POLICY • The Comparisons between Stock Dividend and Stock Split: Stock Dividend Stock Split Par value of stock not change Par value of stock changed according to fraction The number of shares increased by the The number of shares increased by percentage of stock dividend fraction Part of the reserves are capitalized No change in reserves The ratio of shareholders' ownership does The ratio of shareholders' ownership does not change not change Book value per share and declining prices Book value per share and declining prices

DEFINITION * Dividends are payments made by a corporation to its shareholder members. It is the portion of corporate profits paid out to stockholders. When a corporation earns a profit or surplus, that money can be put to two uses: it can either be re-invested in the business (called retained earnings), or it can be distributed to shareholders. There are two ways to distribute cash to shareholders: share repurchases or dividends. Many corporations retain a portion of their earnings and pay the remainder as a dividend.
so by this things it can clearly stated that the bond values are more significant than the stock as it has higher yield and the maturity levels to go with it. so by the stock dividend and the continuous change in the value of the maturity levels of the stock and the stock split it is easier to understand that the current factors are valued more and then the stock price to go  with it.The interest rate and the price earnings ratio will depend on the understanding of the ones used with it.