If a Company Pays a Dividend of $2 to Be

question 127

Multiple Choice

If a company pays a dividend of $2 to be received one year from now,dividends are expected to grow at a rate of 3 percent per year for the indefinite future,and the interest rate is 4 percent,the price of the company's stock should be ________ per share.

• A)$3.40
• B)$28.57
• C)$200.00
• D)$340.00

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Definitions:

Fiscal Spending

Government expenditures on goods, services, and public works financed by taxes, borrowing, or other resources.

Money Saved

The portion of income that is not spent on consumption but kept aside for future use, emergencies, or investments.

Stock Variable

A quantifiable amount at a particular point in time, such as the amount of money in circulation.

Government Bonds

Debt securities issued by a government to finance its expenditure, promising to pay a specified interest rate and to return the principal at maturity.