Suppose You Plan on Buying a Stock Today and Holding

question 91

Multiple Choice

Suppose you plan on buying a stock today and holding it for one year.The stock will pay you a dividend EXACTLY in one year on the day you will sell.You believe the selling price in one year will be $27.10,while the stock will also pay a dividend of $2.40 in one year.If you require 16.60% return to invest in the stock,what is a fair price to pay today?

• A) $25.50
• B) $25.30
• C) $23.24
• D) $21.18

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Definitions:

Consideration

A fundamental concept in contract law that involves something of value exchanged between parties entering into a contract.

Legal Benefit

An advantage or gain received by a party in a contract, making the agreement binding and enforceable in a court of law.

Inducement

The act of persuading or influencing someone to do or engage in something, often associated with an incentive or motivation.

Enforceable Agreement

A contract or agreement that is legally binding and can be upheld or compelled by law.