An Issue of Common Stock Currently Sells for $40

question 44

Multiple Choice

An issue of common stock currently sells for $40.00 per share, has an expected dividend to be paid at the end of the year of $2.00 per share, and has an expected growth rate to infinity of 5% per year. The expected rate of return on this security is

• A) 5%.
• B) 10.25%.
• C) 13.11%.
• D) 10%.

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Definitions:

Observable Behavior

Actions or reactions of an individual that can be seen and measured directly by others.

Inferiority Complex

A psychological condition where a person feels inadequate and deficient, often resulting in a lack of self-esteem and overcompensation in other areas.

Adler

Alfred Adler was an Austrian medical doctor and psychotherapist, founder of the school of individual psychology, known for his concepts of the inferiority complex and striving for superiority.

Conditioned Stimulus

A previously neutral stimulus that, after becoming associated with an unconditioned stimulus, eventually comes to trigger a conditioned response.