Pete and Repete Both Require a 15% Rate of Return

question 94

Multiple Choice

Pete and Repete both require a 15% rate of return on Buckeye stock that is currently selling for $20 per share. Both feel that it is appropriate to use the constant growth model to value the stock. They agree that the dividend next year will be $2.00 and will grow at 5% a year for the foreseeable future. Pete plans to buy the stock and hold it for 4 years while Repete plans to buy the stock and hold it for 8 years. Which of the following statements is true?

• A) Pete should be willing to pay more for the stock than Repete.
• B) Repete should be willing to pay more for the stock than Pete.
• C) Neither will be willing to buy the stock.
• D) Both should be willing to buy the stock.
• E) Insufficient information.

---

Definitions:

Dissociative Identity Disorder

A psychological disorder characterized by the presence of two or more distinct personality states that control an individual's behavior at different times.

Depression

A psychiatric syndrome involving persistent melancholy or an apathy towards activities, gravely affecting one’s routine life.

Psychoanalytic Theorists

Psychologists or theorists who analyze human behavior, thoughts, and emotions based on unconscious motives and conflicts, following the theories initially proposed by Freud.

Depression

A morale disorder showcased by a continuous blue mood or lack of interest in engagements, significantly deteriorating daily life quality.