The Next Questions Refer to the Following

question 4

Multiple Choice

The next questions refer to the following.
Current income is 300, expected future income is 363, and the interest rate is 10%.
-If income rises by $63 in each period,so Y(1) = 363 and Y(2) = 426,then in each period consumption

• A) also rises by $63
• B) becomes 390
• C) rises by $56.7, or 90% of $63
• D) remains constant
• E) rises by $126

---

Definitions:

Constant Dividend

A dividend policy in which a company pays a fixed dividend per share, unaffected by its earnings volatility.

Rate of Return

The increase or decrease in the value of an investment during a predetermined timeframe, represented as a proportion of the investment's original price.

Dividend Next Year

The projected amount of money to be paid to shareholders from a company's earnings in the forthcoming fiscal year.

EPS Growth Rate

The rate at which a company's earnings per share (EPS) has grown or is projected to grow over a period.