Suppose the price level reflects the number of dollars needed to buy a basket of goods containing one cup of coffee, one donut,
and one newspaper. In year one, the basket costs $10.00. In year two, the price of the same basket is $9.00. From year one to year two, there is 1) ______ (A) inflation (B) Deflation at an annual rate of 2) _______ (A)-10.00% (B) -1.11% (C) 1.00% (D) 11.11% .
In year one, $80.00 will buy 3) ______ (A) .11 (B) .13 (C) 4.44 (D) 8 (E) 8.89 baskets, and in year two, $80.00 will buy 4) ______ (A) .11 (B) .13 (C) 4.44 (D) 8 (E) 8.89 baskets.
This example illustrates that, as the price level falls, the value of money 5) _______ (A) Rises (B) Falls (C) Remains the same .
The increase of shoe sellers in the market from the town would result in an increase in competition. In addition, these would provide a lot of choices among consumers on what good they will likely buy. So to have an edge compared to other sellers, some do marketing strategies like advertising.
The answer is $76.54 Let us use 3 months as our period. Thus, we restate the annual required rate of9.25% as a quarterly (or three-month) rate of = 2.3125% (or 0.023125). Applying the constant dividend model with infinite horizon and with the quarterly rate of return and a quarterly dividend of $1.77, we get: = $76.54<span>.
Price of Preferred Stock = Dividend / required return of rate - growth rate</span>
