A Stock Is Expected to Pay $1

question 30

Multiple Choice

A stock is expected to pay $1.25 per share every year indefinitely and the equity cost of capital for the company is 7.5%.What price would an investor be expected to pay per share ten years in the future?

• A)$16.67
• B)$25.01
• C)$33.34
• D)$41.68
• E)$12.50

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Definitions:

Proper Manner

Appropriate or correct method or behavior, often emphasized in formal, legal, or prescribed contexts.

Alteration

The act of making changes to a document, garment, or object that results in a modification of its original state.

Negotiable Instrument

A written agreement that commits to paying a precise amount of money, on demand or at a fixed time, with the person who will make the payment clearly identified on it.

Original Tenor

The initial agreed-upon duration or terms of a financial instrument or loan.