A Common Stock Is Expected to Generate an End-Of-Period Dividend

question 81

Multiple Choice

A common stock is expected to generate an end-of-period dividend of $5 and an end-of-period price of $62.If this security has a beta coefficient of 1.3,the risk-free interest rate is 10%,and the expected return on the market portfolio is 19%,then what is the value of this security today?

• A) $55.50
• B) $59.98
• C) $55.05
• D) $56.30

---

Definitions:

Tax Cuts

Reductions in the amount of taxes that individuals or corporations are required to pay to the government.

Tax Revenue

The monetary gains that are acquired by governments from taxation.

Arthur Laffer

Arthur Laffer is an economist known for the Laffer Curve, which posits that there is an optimal tax rate that maximizes revenue without discouraging economic activity.

Tax Revenues

The proceeds that governments secure by enacting taxes.