The Next Expected Dividend for Stock P Is $2

question 34

Multiple Choice

The next expected dividend for Stock P is $2.5, and the current price of the stock is $32.5. Its earnings, dividends, and price can be expected to grow at a constant rate of 4 percent per year. The risk free rate is 3%, the market risk premium is 5.5%, and the stock's beta is 1.2. Based on the given information, which of the following statements is correct?

• A) An investor should buy this stock because its expected rate of return is 11.69%, and its required rate of return is 9.6%
• B) An investor should not buy this stock because its expected rate of return is 9.6%, and its required rate of return is 11.69%
• C) An investor should buy this stock because its expected rate of return is 12.54%, and its required rate of return is 8.28%,
• D) An investor should not buy this stock because its expected rate of return is only 8.28%, and its required rate of return is 12.54%
• E) An investor should be indifferent toward buying or selling the stock, because its required rate of return is equal to its expected rate of return.

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Definitions:

Emotional Needs

Fundamental psychological necessities for wellbeing, including feeling loved, understood, and valued.

Freud's Legacy

The lasting impact of Sigmund Freud's theories on psychoanalysis, psychology, and contemporary thought, including concepts of the unconscious mind.

Scientific Method

A systematic, empirical process of inquiry aimed at understanding, explaining, and predicting phenomena through observation, experimentation, and hypothesis testing.

Evolutionary Changes

Alterations in the genetic makeup of a population over successive generations due to natural selection, genetic drift, mutation, and gene flow.