The Required Return on Mountain Brook Stock Is 14 Percent

question 29

Multiple Choice

The required return on Mountain Brook stock is 14 percent and the dividend growth rate is 5.5 percent.The stock is currently selling for $18.80 a share.What is the dividend yield?

• A)7.50 percent
• B)8.93 percent
• C)9.75 percent
• D)10.50 percent
• E)12.50 percent

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Definitions:

Absolute Purchasing Power Parity

A theory that suggests that, in the absence of transaction costs and other barriers, identical goods and services in different countries should have the same price when expressed in a common currency.

Exchange Rate

The amount one currency is valued at when translated into another currency.

Kilogram

The base unit of mass in the International System of Units (SI), equivalent to 1,000 grams or approximately 2.20462 pounds.

Long-Run Exchange Rate

The exchange rate that reflects the underlying fundamentals of an economy over a longer period, free from short-term fluctuations.