Assume That You Would Like to Purchase 100 Shares of Preferred

question 55

Multiple Choice

Assume that you would like to purchase 100 shares of preferred stock that pays an annual dividend of $6 per share.However,you have limited resources now,so you cannot afford the purchase price.In fact,the best that you can do now is to invest your money in a bank account earning a simple interest rate of 6 percent,but where interest is compounded daily (assume a 365-day year) .Because the preferred stock is riskier,it has a required annual rate of return of 12 percent (assume that this rate will remain constant over the next 5 years) .For you to be able to purchase this stock at the end of 5 years,how much must you deposit in your bank account today,at t = 0?

• A) $2,985.00
• B) $4,291.23
• C) $3,138.52
• D) $3,704.18
• E) $4,831.25

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Definitions:

Tempo

The speed at which a piece of music is played or the pace of an activity or process.

Pitch

The quality of a sound governed by the rate of vibrations producing it; the highness or lowness of a tone.

Intonation

The rise and fall of the voice in speaking, which can affect the meaning of what is being said.

Chronological Pattern

Organizing content or events in the order they occurred over time, from the earliest to the most recent.