An Investor Wants to Purchase Shares in a Firm That

question 66

Multiple Choice

An investor wants to purchase shares in a firm that has no growth opportunities but pays an annual dividend of $2.35.The market rate of return on similar securities is 17.5 percent.What is the maximum price the investor should pay for this stock?

• A)$14.52
• B)$12.88
• C)$13.43
• D)$12.76
• E)$13.18

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Definitions:

Federal Trade Commission (FTC)

A U.S. federal agency established for the purpose of protecting consumers and promoting competition by preventing anticompetitive, deceptive, and unfair business practices.

Clayton Act

An antitrust law enacted in 1914 to prevent anti-competitive practices, monopolies, and to protect the rights of consumers and businesses.

Robinson-Patman Act

A United States federal law aimed at preventing anticompetitive practices by producers, specifically price discrimination.

Discriminated

Treated differently or unfairly, often based on race, gender, age, or sexual orientation.