You Are Considering Buying Stock and Require a Rate of Return

question 137

Multiple Choice

You are considering buying stock and require a rate of return of 12%.   If you expect the dividend to be $1.25 for years 1-3, $1.50 in year 4 and $1.75 in year 5 with an expected selling price at that time of $67, then what is the most you should pay today? ​

• A)​$52.69
• B)​$42.96
• C)​$40.85
• D)​$41.00

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Definitions:

Moon Illusion

An optical illusion in which the moon appears larger near the horizon than it does while higher up in the sky.

Horizon

The line at which the earth's surface and the sky appear to meet, or metaphorically, the limit of a person's knowledge, experience, or interest.

Social Error

A mistake or misunderstanding that occurs in social contexts or interactions.

Collective Delusion

A phenomenon where a group of people share and believe in a false or unfounded idea or belief.