240 Frederic S. Mishkin • Economics of Money, Banking, and Financial Markets, Seventh Edition

15)

Using the one-period valuation model, assuming a year-end dividend of $1.00, an expected sales price of $100, and a required rate of return of 10%, the current price of the stock would be

(a)

$90.91

(b)

$91.00

(c)

$91.82

(d)

$92.00

(e)

$101.00

Answer:

#### Question Status: New

16)

Using the one-period valuation model, assuming a year-end dividend of $0.50, an expected sales price of $50, and a required rate of return of 10%, the current price of the stock would be

(a)

$50.50.

(b)

$50.00.

(c)

$45.91.

(d)

$45.00.

(e)

indeterminate.

Answer:

#### Question Status: New

17)

Using the one-period valuation model, assuming a year-end dividend of $1.00, an expected sales price of $100, and a required rate of return of 5%, the current price of the stock would be

(a)

$110.00.

(b)

$101.00.

(c)

$100.00.

(d)

$96.19.

(e)

$95.23.

Answer:

#### Question Status: New

18)

Using the one-period valuation model, assuming a year-end dividend of $11.00, an expected sales price of $110, and a required rate of return of 10%, the current price of the stock would be

(a)

$121.

(b)

$110.

(c)

$100

(d)

$99

(e)

$91

Answer:

#### Question Status: New

19)

In the generalized dividend model, if the expected sales price is in the distant future

(a)

it does not affect the stock price.

(b)

it is the most important determinant of the current stock price.

(c)

it is equally important with dividends in determining the stock’s price.

(d)

it is less important than dividends but still affects a stock’s price.

(e)

it is more important than dividends in determining a stock’s price.

Answer: