You Have a Chance to Purchase a Perpetual Security That

question 90

Multiple Choice

You have a chance to purchase a perpetual security that has a stated annual payment (cash flow) of $50.However,this is an unusual security in that the payment will increase at an annual rate of 5 percent per year;this increase is designed to help you keep up with inflation.The next payment to be received (your first payment,due in 1 year) will be $52.50.If your required rate of return is 15 percent,how much should you be willing to pay for this security?

• A) $350
• B) $482
• C) $525
• D) $556
• E) $610

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Definitions:

Dysregulation

The inability to properly adjust or manage emotional responses or processes.

Dopamine

A neurotransmitter in the brain that plays a key role in regulating mood, and motivation, and is linked to reward and pleasure systems.

Brain

The organ in the head of vertebrates responsible for thought, memory, emotion, touch, motor skills, vision, breathing, temperature, hunger, and every process that regulates our body.

Alternative Model

A different or non-traditional framework or theory that offers a variant perspective or solution to a problem or situation.