We Have Collected Price Per Share and Dividend Information from a Sample

question 151

Multiple Choice

We have collected price per share and dividend information from a sample of 30 companies. The y-intercept in this instance suggests:

• A) for each additional dollar in stock price, we can anticipate an additional $2.73 in dividend.
• B) for each additional dollar in stock price, we can anticipate a drop of $2.41 in dividend.
• C) when the stock price is zero, we can anticipate a dividend of $0.27. This value, however, makes no sense.
• D) when the stock price is zero, we can anticipate a dividend of $-3.68. This value, however, makes no sense.
• E) when the dividends are zero, we can anticipate a negative share price.

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Definitions:

Classical Macroeconomic Theory

An economic theory that posits that markets function efficiently and that full employment is achieved when economies operate at a state of equilibrium without government intervention.

Nominal Variables

Variables that are measured in terms of money and have not been adjusted for inflation, as opposed to real variables which are inflation-adjusted.

Money Supply

The total amount of money in circulation or in existence within a country's economy.

Exchange Rate

The price of one country's currency expressed in the currency of another country; it determines how much foreign currency one can get with a unit of domestic currency.