You Expect a Share of RiskyEcon

question 191

Multiple Choice

You expect a share of RiskyEcon.com to sell for $56 a year from now and to pay a dividend of $1 per share annually.If the current interest rates on government bonds is 5%,but you demand a risk premium of 5% to hold a share of this risky stock,what is the most you would be willing to pay for this stock today (rounded to the nearest dollar) ?

• A) $52.
• B) $54.
• C) $56.
• D) $57.
• E) $63.

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Definitions:

Supreme Court

The Supreme Court is the highest judicial body in a country, typically having the ultimate jurisdiction over all other courts.

Fifth Amendment

An amendment to the U.S. Constitution that provides various rights related to legal proceedings, including protection against self-incrimination and double jeopardy.

Self-Incrimination

The act of exposing oneself to criminal prosecution by making statements or producing evidence.

Evidence Suppression

The legal process by which certain evidence is prevented from being shown in court due to its illegal acquisition or irrelevance.