What Should Be the Price for a Common Stock Paying

question 43

Multiple Choice

What should be the price for a common stock paying $3.50 annually in dividends if the growth rate is zero and the discount rate is 8%?

• A) $22.86
• B) $28.00
• C) $42.00
• D) $43.75

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Definitions:

Articles of Confederation

The first constitution of the United States, ratified in 1781, which established a confederation of sovereign states with a weak central government.

Boston Tea Party

A political protest that took place in 1773 in Boston, where American colonists, frustrated with British tax laws, dumped an entire shipment of tea sent by the East India Company into the harbor.

John Adams

The second President of the United States (1797-1801), a Founding Father, and a key figure in the American Revolution and the drafting of the Declaration of Independence.

Samuel Adams

An American statesman, political philosopher, and one of the Founding Fathers of the United States, known for his role in the American Revolution.