What would be the market price of a stock that paid a constant $2.00 per year in dividends in perpetuity, if the expected market return for a risk of this type was 7.5%?
A) $25
B) $100
C) $26.67
D) $27.50

Question

Quizplus · Accepted Answer

The market price of a stock paying a constant dividend in perpetuity can be calculated using the formula P = D / r, where P is the price, D is the dividend, and r is the required rate of return. Plugging in the values gives P = $2.00 / 0.075 = $26.67.

What Would Be the Market Price of a Stock That