If a Stock's Dividend Is Expected to Grow at a Constant

question 170

Multiple Choice

If a stock's dividend is expected to grow at a constant rate of eight percent in the future and it has just paid a dividend of $1.25 a share, and you have an alternative investment of equal risk that will earn a 12 percent rate of return, what would you be willing to pay per share for this stock?

• A)$31.25
• B)$1.40
• C)$1.25
• D)$1.12

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Definitions:

Humanistic

A psychological perspective that emphasizes the study of the whole person, looking at human behavior not only through the eyes of the observer but also through the eyes of the person doing the behaving.

Adler

Alfred Adler was an Austrian medical doctor and psychotherapist who founded the school of individual psychology, emphasizing the importance of social context in personality development.

Social Strivings

Efforts made by individuals to achieve status, acceptance, or fulfillment within their social communities.

Sensing

The process of receiving information through sensory organs and translating it into neural signals for the brain to interpret.