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:

Money Market Instrument

Short-term debt securities that are highly liquid and considered to be safe investments.

Treasury Bills

Treasury Bills are short-term government securities issued at a discount from the par value and mature in one year or less, serving as a safe investment.

Government Bonds

Debt securities issued by a government to support government spending and obligations, typically offering a fixed rate of return.

Collection Time

The average period it takes for a business to receive payments owed by its customers after a sale has been made, often measured in days.