The Reading Co

question 17

Multiple Choice

The Reading Co. has adopted a policy of increasing the annual dividend on its common stock at a constant rate of 3% annually. The last dividend it paid was $0.90 a share. What will its dividend be
In six years?

• A) $.90
• B) $.93
• C) $1.04
• D) $1.07
• E) $1.11

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Definitions:

Risk Premium

The extra return above the risk-free rate that investors require as compensation for the risk of an investment.

Maturity Structure

The categorization of a company's or government's debt based on the lengths of time until those debts are due or mature.

Interest Rates

The fraction of a total amount of money that is levied as a fee for borrowing it, signifying the expense of taking out a loan or the earnings from putting money into savings.

Default Risk

The risk associated with a borrower failing to make required payments on a debt they owe.