Suppose Stock a Sells for $50 Per Share and Pays

question 250

Multiple Choice

Suppose stock A sells for $50 per share and pays dividends of $2 per share per year. Stock B sells for $100 per share and pays dividends of $4 per share per year. Through the process of arbitrage,
We would expect the price of

• A) stock A to fall and/or the price of stock B to rise.
• B) stock A to rise and/or the price of stock B to fall.
• C) both stocks to rise or fall together.
• D) neither stock to change.

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Definitions:

Tradable Permits

Tradable permits are environmental policy instruments that allow companies or entities to buy or sell allowances to emit a certain amount of pollutants, aiming to reduce overall emissions efficiently.

Exclusive Licenses

Agreements granting one party alone the right to sell, produce, or use intellectual property or product.

Tradable Permits

Government-issued rights or allowances that permit the holder to emit a certain amount of a substance; can be bought, sold, or traded.

Common Resource

A resource like air or water that is not owned by anyone, but is available for use by everyone, often leading to overuse and depletion.