Assume That an Investor Expects to Receive the Following Dividends

question 30

Multiple Choice

Assume that an investor expects to receive the following dividends: year 1: $8, years 2-7: $10, and years 11-12: $12. If the investor's discount rate is 5 percent, what is the present value of this dividend stream?

• A) $91.06
• B) $74
• C) $62.77
• D) $69.66
• E) Cannot be determined

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Definitions:

Retribution Bias

The tendency to seek revenge or punishment disproportionate to the offense, often influenced by emotional reactions rather than rational thought.

Defense Mechanism

Psychological strategies used unconsciously by individuals to protect themselves from anxiety or unacceptable thoughts and feelings.

Aggressive Individuals

Refers to persons who exhibit behavior that is forceful, assertive, or intended to dominate.

Derogation of Target Bias

A cognitive bias in which individuals devalue a target or outcome once it becomes unattainable, often to reduce cognitive dissonance.