The Required Return on a Particular Stock Is 13

question 42

Multiple Choice

The required return on a particular stock is 13.5 percent. The stock is priced at $12.95 per share, and dividends are paid annually and are expected to grow at 3 percent per year forever. What is the dividend the stock just paid?

• A) $1.23
• B) $2.37
• C) $1.13
• D) $1.32
• E) $1.09

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Definitions:

Cash Flow Hedge

A strategy used by companies to manage the risk associated with fluctuation in cash flow due to changes in foreign exchange rates, interest rates, or commodity prices.

Forward Contract

A contractual agreement to buy or sell a particular commodity or financial instrument at a pre-determined price at a future date.

Spot Rates

The existing market value at which one can buy or sell a currency for instant delivery.

Selling Price

The set amount of money for which a product or service is sold to customers.