Assume That You Would Like to Purchase 100 Shares of Preferred

question 55

Multiple Choice

Assume that you would like to purchase 100 shares of preferred stock that pays an annual dividend of $6 per share.However,you have limited resources now,so you cannot afford the purchase price.In fact,the best that you can do now is to invest your money in a bank account earning a simple interest rate of 6 percent,but where interest is compounded daily (assume a 365-day year) .Because the preferred stock is riskier,it has a required annual rate of return of 12 percent (assume that this rate will remain constant over the next 5 years) .For you to be able to purchase this stock at the end of 5 years,how much must you deposit in your bank account today,at t = 0?

• A) $2,985.00
• B) $4,291.23
• C) $3,138.52
• D) $3,704.18
• E) $4,831.25

---

Definitions:

Heavy Drinking

The consumption of large quantities of alcohol in a short period, often leading to health risks and social problems.

Sleep Disturbance

Disruptions in the normal sleep cycle, which can include difficulties in falling asleep, staying asleep, or experiencing restful sleep.

Depression

An emotional state marked especially by sadness, inactivity, difficulty in thinking and concentration, a significant increase or decrease in appetite and time spent sleeping, feelings of dejection and hopelessness, and sometimes suicidal tendencies.

Suicide Risk

The possibility that an individual will attempt to take their own life or engage in self-harmful behaviors, often assessed through various psychological evaluations.