Assume That You Would Like to Purchase 100 Shares of Preferred

question 55

Multiple Choice

Assume that you would like to purchase 100 shares of preferred stock that pays an annual dividend of $6 per share.However,you have limited resources now,so you cannot afford the purchase price.In fact,the best that you can do now is to invest your money in a bank account earning a simple interest rate of 6 percent,but where interest is compounded daily (assume a 365-day year) .Because the preferred stock is riskier,it has a required annual rate of return of 12 percent (assume that this rate will remain constant over the next 5 years) .For you to be able to purchase this stock at the end of 5 years,how much must you deposit in your bank account today,at t = 0?

• A) $2,985.00
• B) $4,291.23
• C) $3,138.52
• D) $3,704.18
• E) $4,831.25

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Definitions:

Albert Bandura

A psychologist known for his work on social learning theory and the concept of self-efficacy.

Behavioral Control

The regulation of one's actions and responses, especially in adapting to societal norms and coping with impulses.

Therapeutic Value

The health benefits or healing effects provided by a particular treatment or intervention.

Catharsis

A process of releasing and thereby providing relief from strong or repressed emotions.