Suppose a stock pays shareholders $100/year in dividends. The stock is to be held for 10 years. How much will an investor be willing to pay for the stock a 10% interest, if the investor is certain that the company will go bankrupt after 10 years (.e., the stock will be worthless and no further dividends will be paid)? O A. $1,000 O B. $514 O C. $1,594 O D. $16 E. $614

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Suppose a stock pays shareholders $100/year in dividends. The stock is to be held for 10 years. How much will an investor be willing to pay for the stock at 10% interest, if the investor is certain that the company will go bankrupt after 10 years (i.e., the stock will be worthless
and no further dividends will be paid)?
O A. $1,000
O B. $514
O C. $1,594
O D. $16
OE. $614
Transcribed Image Text:Suppose a stock pays shareholders $100/year in dividends. The stock is to be held for 10 years. How much will an investor be willing to pay for the stock at 10% interest, if the investor is certain that the company will go bankrupt after 10 years (i.e., the stock will be worthless and no further dividends will be paid)? O A. $1,000 O B. $514 O C. $1,594 O D. $16 OE. $614
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