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Author Question: If the present value equation used to calculate the price of a stock you are considering buying is 7 ... (Read 72 times)

jjjetplane

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on: Jun 29, 2018
If the present value equation used to calculate the price of a stock you are considering buying is 7 / (0.04 - 0.03), which of the following is correct, assuming that dividends will grow at a constant rate?
 
  A) The stock price is 7, the dividend growth rate is 3 percent, and the interest rate is 1 percent.
  B) The stock price is 700, the dividend growth rate is 3 percent, and the interest rate is 4 percent.
  C) The dividend is 7 per share, the dividend growth rate is 1 percent, and the interest rate is 4 percent.
  D) The dividend is 7 per share, the dividend growth rate is 4 percent, and the interest rate is 3 percent.

Question 2

If the present value equation used to calculate the price of a stock you are considering buying is 12 / (0.05 - 0.02), which of the following is correct, assuming that dividends will grow at a constant rate?
 
  A) The dividend is 12 per share, the dividend growth rate is 5 percent, and the interest rate is 2 percent.
  B) The dividend is 12 per share, the dividend growth rate is 2 percent, and the interest rate is 5 percent.
  C) The stock price is 12, the dividend growth rate is 5 percent, and the interest rate is 3 percent.
  D) The stock price is 12, the dividend growth rate is 2 percent, and the interest rate is 5 percent.


ryhom

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Reply #1 on: Jun 29, 2018
Answer to Question 1

B

Answer to Question 2

A


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