Determine How Much You Would Be Willing to Pay for a Security

question 32

Multiple Choice

Determine how much you would be willing to pay for a security that pays $60 annually indefinitely (a perpetuity) , assuming you require an 8 percent return on this investment.

• A)$480
• B)$743
• C)$1,000
• D)$750

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Definitions:

Financially Better

A general term that implies an improvement in financial condition or performance compared to a previous period.

Variable Expenses

Costs that fluctuate in direct proportion to changes in the level of activity or business operations, such as materials and labor.

Fixed Expenses

Costs that do not change with the level of production or sales activity, such as rent, salaries, and insurance.

Financial Advantage

An economic benefit or superiority that a person or entity holds, giving them a better position in financial transactions or comparisons.