An Investor Is Contemplating the Purchase of Common Stock at the Beginning

question 4

Multiple Choice

An investor is contemplating the purchase of common stock at the beginning of this year and to hold the stock for one year. The investor expects the year-end dividend to be $2.00 and expects a year-end price for the stock of $40. If this investor's required rate of return is 10%, then the value of the stock to this investor is

• A) $36.36.
• B) $38.18.
• C) $33.06.
• D) $34.88.

---

Definitions:

Clastic

A material consisting of pieces (clasts) derived from preexisting rocks; usually formed on Earth’s surface in low-temperature environments; syn. detrital.

Clast Density

The measure of the density of the fragments or grains that make up a sedimentary rock.

Clast Size

The dimensions of the fragments or grains that make up sedimentary rocks, indicating the energy of the environment in which they were deposited.

Clast Shape

Describes the form or outline of the fragments or grains that make up sedimentary rocks, influenced by processes such as weathering and transportation.