Question
1.The preferred stock of BIDU Inc. pays an annual dividend of $7.50 and sells for $59.70 a share. What is the rate of return on
1.The preferred stock of BIDU Inc. pays an annual dividend of $7.50 and sells for $59.70 a share. What is the rate of return on this security?
A. 10.38 percent
B. 12.56 percent
C. 12.72 percent
D. 12.84 percent
2. A supernormal growth stock generally:
A. Is associated with a company that is experiencing rapid contraction
B. Tends to increase its dividends per share by 28% or more for an extended number of years
C. Has high growth dividends only for a limited number of years
D. Has dividends that grow at a high rate for the life of the stock
3. ALPHA Inc. has paid annual dividends of $1.25, $1.62, and $2.00 over the past three years. Dividends in the future are expected to grow at a constant rate of 4%. Which one of the following formulas should be used to compute the value of the stock today?
A. P0 = D1/(1+k)1 + D2/(1+k)2 + ... + Dn/(1+k)n + Pn/(1+k)n
B. P0 = D/k
C. P0 = D1/(1+k)n + g
D. P0 = D1/(k-g)
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