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:

1970

A year marked by significant global and national events, considered part of the late 20th century historical context.

Dual-Income Families

Households in which both partners earn income from employment, becoming increasingly common in modern societies.

Paid Family Leave

An employee benefit that provides paid time off work to care for a family member or for childbirth or adoption.

Work Week

The standard period of time during which work is done, usually defined as Monday through Friday, totaling approximately 40 hours in many countries.