You Are Approached About Purchasing a Share of Common Stock

question 65

Multiple Choice

You are approached about purchasing a share of common stock in a company that will definitely go out of business exactly 2 years from today.The company is anticipated to pay a $10 dividend one year from now and a $15 dividend two years from now (immediately before it goes out of business) .What price are you willing to pay for the stock if the required rate of return on the stock is 5%?

• A) $22.68
• B) $23.13
• C) $23.81
• D) $25.00

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Definitions:

Reproductive Isolation

A set of mechanisms that prevent individuals of different species or populations from interbreeding and producing fertile offspring.

Microbial Species

A group of microorganisms, such as bacteria, archaea, fungi, and protists, that share similar genetic characteristics and are distinct from other groups.

Horizontal Gene Transfer

The swapping of genetic material in single or multiple-celled organisms through mechanisms that bypass the "vertical" passing down of DNA from ancestor to descendant.

Phylogenetic Species Concept

A concept in biology that defines a species based on the smallest group of individuals that share a common ancestor, representing one branch on the tree of life.