What Should Be the Current Price of a Stock If

question 65

Multiple Choice

What should be the current price of a stock if the expected dividend is $5,the stock has a required return of 20%,and a constant dividend growth rate of 6%?

• A) $19.23
• B) $25.00
• C) $35.71
• D) $37.86

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Definitions:

Behavior

The actions or reactions of an organism, typically in response to its environment.

Cognitive Dissonance

The mental discomfort experienced by a person holding two or more contradictory beliefs, values, or ideas.

Dissonance

A psychological or emotional state of tension resulting from conflicting attitudes, beliefs, or behaviors.

Festinger

Leon Festinger, an American social psychologist known for his theory of cognitive dissonance, which describes the discomfort experienced when holding two or more conflicting cognitions.