1)Bill, Jim, and Shelly are all looking to buy the same stock that pays dividends. Bill...

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Finance

1)Bill, Jim, and Shelly are all looking to buy the same stockthat pays dividends. Bill plans on holding the stock for one year.Jim plans on holding the stock for three years. Shelly plans onholding the stock until she retires in 10 years. Which one of thefollowing statements is correct?
1. Bill will be willing to pay the most for the stock because hewill get his money back in one year when he sells.
2. Jim should be willing to pay three times as much for thestock as Bill because his expected holding period is three times aslong as Bill's.
3. Shelly should be willing to pay the most for the stockbecause she will hold it the longest and hence she will get themost dividends.
4. All three should be willing to pay the same amount for thestock regardless of their holding period.
2) Explain your answer using concepts and financial theory westudied during the class.
3) Reflection – the students also should include a paragraph inthe initial response in their own words reflecting on specificallywhat they learned from the assignment and how they think they couldapply what they learned in the workplace.

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4.2 Ratings (587 Votes)

1 The statement that is correct is the 4th statement ie All three should be willing to pay the same amount for the stock regardless of their holding period 2 The concept of present value will be applicable here Price of a stock or the amount that an investor is See Answer

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1)Bill, Jim, and Shelly are all looking to buy the same stockthat pays dividends. Bill plans on holding the stock for one year.Jim plans on holding the stock for three years. Shelly plans onholding the stock until she retires in 10 years. Which one of thefollowing statements is correct?1. Bill will be willing to pay the most for the stock because hewill get his money back in one year when he sells.2. Jim should be willing to pay three times as much for thestock as Bill because his expected holding period is three times aslong as Bill's.3. Shelly should be willing to pay the most for the stockbecause she will hold it the longest and hence she will get themost dividends.4. All three should be willing to pay the same amount for thestock regardless of their holding period.2) Explain your answer using concepts and financial theory westudied during the class.3) Reflection – the students also should include a paragraph inthe initial response in their own words reflecting on specificallywhat they learned from the assignment and how they think they couldapply what they learned in the workplace.