Refer to the Previous Question

question 11

Multiple Choice

Refer to the previous question. How much should you be willing to pay for the stock if you feel that the 5 per cent growth rate can be maintained indefinitely and you require a 17 per cent return?

• A) £22.16
• B) £19.28
• C) £21.32
• D) £23.63
• E) £25.46

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Definitions:

Probability

The measure of the likelihood that an event will occur, often expressed as a number between 0 and 1.

Utility Function

A mathematical representation of how consumer preferences over a set of goods and services translate into choices given their budget constraint.

Probability

Probability measures the likelihood of a particular outcome or event occurring, expressed as a number between 0 and 1.

Utility Function

A mathematical representation that ranks preferences or satisfaction derived from consuming goods and services.