If Microsoft Stock Has a Constant Net Return Each Year

question 48

Multiple Choice

If Microsoft stock has a constant net return each year, then the value of a share of Microsoft stock is determined by

• A) subtracting Microsoft's total costs from its total revenue.
• B) multiplying the annual net income by the number of shares.
• C) dividing the annual net income from the asset by the interest rate.
• D) both a and b above.

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Definitions:

Fed Funds Rate

The interest rate at which depository institutions lend reserve balances to other depository institutions overnight, a vital monetary policy tool used by the Federal Reserve.

Discount Rate

The rate at which the central bank lends money to commercial banks and other financial institutions through its discount window.

Open Market Operations

Open Market Operations involve the buying and selling of government securities by a central bank to control the money supply and interest rates in the economy.

Tight Monetary Policy

A central bank strategy aiming to slow economic growth by increasing interest rates and reducing the quantity of money in circulation.