Suppose You Plan to Hold a Stock for One Year

question 117

Multiple Choice

Suppose you plan to hold a stock for one year.You expect that,in one year,it will sell for $30 and pay a dividend of $3 per share.If your required return on equity is 10%,what is the most you should be willing to pay for the share today?

• A) $3.30
• B) $23
• C) $30
• D) $33

---

Definitions:

Month/Year

Month/Year typically denotes a specific point in time, used for referencing, scheduling, and historical data compilation, often in the format MM/YYYY.

Deflation

A decrease in the general price level of goods and services, often indicating a contraction in the amount of money or credit available in the economy.

CPI

The Consumer Price Index tracks the weighted average price changes of a basket containing consumer goods and services, such as food, healthcare, and transportation, to gauge average price movements.

Prices Increase

A situation where the general level of prices for goods and services rises, often measured by the inflation rate.