You Wish to Earn a Return of 13% on Each

question 38

Multiple Choice

You wish to earn a return of 13% on each of two stocks, X and Y. Stock X is expected to pay a dividend of $3 in the upcoming year while stock Y is expected to pay a dividend of $4 in the upcoming year. The expected growth rate of dividends for both stocks is 7%. The intrinsic value of stock X

• A) will be greater than the intrinsic value of stock Y.
• B) will be the same as the intrinsic value of stock Y.
• C) will be less than the intrinsic value of stock Y.
• D) will be the same or greater than the intrinsic value of stock Y.
• E) None of the options are correct.

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Definitions:

Objectives

Specific, measurable goals set by an individual or organization to achieve in a defined timeframe.

Base Salary

The initial rate of compensation that an employee receives not including bonuses, benefits, or any additional pay.

Individual-level Performance-based

Relates to assessment or evaluation mechanisms focused on the output or achievements of a single person.

Merit

The quality of being particularly good or worthy, especially so as to deserve praise or reward.