A Stock Currently Sells for $30 Per Share and Pays

question 46

Multiple Choice

A stock currently sells for $30 per share and pays $1.00 per year in dividends.What is an investor's valuation of this stock if he expects it to be selling for $37 in one year and requires a 12 percent return on equity investments?

• A) $38
• B) $33.50
• C) $34.50
• D) $33.93

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Definitions:

Express Warranty

A clearly stated promise or guarantee about the quality or condition of a product or service made by a seller to a buyer.

Implied Warranty Of Merchantability

A legal presumption that ensures a product sold by a merchant meets certain quality and performance standards.

Disclaimer

A statement that denies responsibility or affiliation, often used to limit legal liability or to distance oneself from certain information or actions.

Unconscionable

A term applied to a contract in which one party has so much more bargaining power than the other party that the powerful party dictates the terms of the agreement and eliminates the other party’s free will.