A Stock Sells for $25 with a General Forecast of D1

question 19

Multiple Choice

A stock sells for $25 with a general forecast of D1 = $1.25. You forecast D1 will be $1.40. If there is complete convergence, your one year rate of return would be

• A) 8.5%.
• B) 12.4%.
• C) 9.1%.
• D) 17.6%.

---

Definitions:

Aggregate Spending

The total spending in an economy, including consumption, investment, government expenditures, and net exports.

Discretionary Fiscal Policy

The deliberate manipulation of government purchases, taxation, and transfer payments to promote macroeconomic goals, such as full employment, price stability, and economic growth

Taxation

The practice by which a government imposes financial charges on its citizens or residents to fund public spending and various public expenditures.

Government Spending

The total of all government expenses, including salaries, defense, education, and public services.