One-Period Model: Assume That You Are Considering the Purchase of a Stock

question 64

Multiple Choice

One-Period Model: Assume that you are considering the purchase of a stock which will pay dividends of $4.50 during the next year. Further assume that you will be able to sell the stock for $85.00 one year from today and that your required rate of return is 15 percent. How much would you be willing to pay for the stock today? (Round off to the nearest $0.01)

• A) $89.50
• B) $65.37
• C) $94.10
• D) $77.82

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Definitions:

T-statistic

A type of statistic used in hypothesis testing, determined by the difference between the sample mean and the population mean divided by the standard error.

Degrees Of Freedom

The number of values in a final calculation of a statistic that are free to vary.

Null Hypothesis

A statement or hypothesis in statistics that suggests no significant difference or effect; it is the hypothesis that researchers aim to test against.

Region Of Rejection

Values of a statistic that result in the decision to reject the null hypothesis.