A share of stock will pay a dividend of 25 in one year, and will ...

[Diane]

A share of stock will pay a dividend of 25 in one year, and will be sold for an expected price of 500 at that time. If the current one-year interest rate is 5, the current price of the stock will be approximately equal to
 
  A) 100.
  B) 475.
  C) 500.
  D) 525.
  E) none of the above

Question 2

Suppose a liquidity trap situation exists. Which of the following is most likely to occur if taxes are cut?
 
  A) no change in output and no change in the interest rate
  B) an increase in output and an increase in the interest rate
  C) an increase in output and little change in the interest rate
  D) an increase in output and a reduction in the interest rate
  E) none of the above

[Liddy]

Answer to Question 1

C

Answer to Question 2

C