If the Dividend Yield for Year 1 Is Expected to Be

question 81

Multiple Choice

If the dividend yield for year 1 is expected to be 5% based on a stock price of $25,what will the year 4 dividend be if dividends grow annually at a constant rate of 6%?

• A) $1.33
• B) $1.49
• C) $1.58
• D) $1.67

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Definitions:

Future Value

The value of a current asset at a future date based on an assumed rate of growth over time.

Compound Interest

Interest calculated on the initial principal and also on the accumulated interest of previous periods of a deposit or loan.

No Further Deposits

A condition in financial agreements where an individual is not required or allowed to make additional contributions beyond the initial or specified amounts.

Deposited

Referring to money that has been placed into a financial account for safekeeping or savings.