You Are Trying to Determine the Fair Price to Pay

question 48

Multiple Choice

You are trying to determine the fair price to pay for a share of Philip Morris. If you buy this stock, you plan to hold it for a year. At the end of the year, you expect to receive a dividend of $5.50 and to sell the stock for $154. The discount rate for Philip Morris stock is 16%. What should be the price of this stock?

• A) $99.80
• B) $137.50
• C) $144.22
• D) $151.66

---

Definitions:

Payment Of Money

A transaction where currency is transferred from one party to another as a means of fulfilling a financial obligation.

Tangible Real Property

Physical property, such as land or buildings, that has inherent value and exists in the material world.

Corn

A cereal plant that yields large kernels set in rows on a cob, widely grown for food, fodder, and biofuel.

Mortgage

A loan obtained for the purpose of purchasing property, where the property itself serves as collateral for the loan.