If a Stock's Dividend Is Expected to Grow at a Constant

question 107

Multiple Choice

If a stock's dividend is expected to grow at a constant rate of 6 percent in the future and it has just paid a dividend of $3.00 per share, and you have an alternative investment of equal risk that will earn a 9 percent rate of return, what would you be willing to pay per share for this stock?

• A)$9
• B)$20
• C)$45
• D)$100

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Definitions:

Implicit Social Rules

Unwritten rules that govern behavior and interactions within a society.

Bluffing

The act of misleading others into believing something that is not true, especially to gain an advantage in negotiations or competitions.

Misrepresenting

The act of presenting information in a way that is false or misleading.

Truth Telling

The act of providing honest and accurate information or disclosure.