Suppose that eLake, an online auction site, is paying a dividend of $2 per share. You expect

Question:

Suppose that eLake, an online auction site, is paying a dividend of $2 per share. You expect this dividend to grow 2 percent per year, and the interest rate is 10 percent. What is the most you would be willing to pay for a share of stock in eLake? If the interest rate is 5 percent, what is the most you would be willing to pay? When interest rates in the economy decline, would you expect stock prices in general to rise or fall? Briefly explain.

Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...