# Consider a share of stock in a company that will pay a dividend of \$20 one year from today and immediately liquidate its assets. Your expected share of the liquidated assets is \$5. Your time value of money is such that you consider \$1.05 a year from today is equivalent to \$1.00 today. What is the maximum you would be willing to pay for a share of stock in this company?​ a.​\$25.00 b.​\$17.39 c.​\$23.81 d.\$20.00  2. An example of a currency board regime might be if the United States were to pledge to  a.​undertake an intervention in the currency market if the US dollar approaches the lower bound. b.​convert or exchange US dollars for the euro at any time at a stated fixed price because the euro is the anchor currency of the US dollar.   c.​undertake an intervention in the currency market if the US dollar approaches the upper bound. d.​undertake an intervention in the currency market if the euro approaches either the upper or lower bound.

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1. Consider a share of stock in a company that will pay a dividend of \$20 one year from today and immediately liquidate its assets. Your expected share of the liquidated assets is \$5. Your time value of money is such that you consider \$1.05 a year from today is equivalent to \$1.00 today. What is the maximum you would be willing to pay for a share of stock in this company?​
 a. ​\$25.00 b. ​\$17.39 c. ​\$23.81 d. \$20.00

2. An example of a currency board regime might be if the United States were to pledge to

 a. ​undertake an intervention in the currency market if the US dollar approaches the lower bound. b. ​convert or exchange US dollars for the euro at any time at a stated fixed price because the euro is the anchor currency of the US dollar. c. ​undertake an intervention in the currency market if the US dollar approaches the upper bound. d. ​undertake an intervention in the currency market if the euro approaches either the upper or lower bound.
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Step 1

Expected Dividend = \$20

Expected Share in Liquidated Assets = \$5

Total Expected Return (fv) = \$20 + \$5 = \$25

Value of \$1 after 1 Year is \$1.05, therefore the present value factor is 0.05

Calculation of the present value of return is as follows:

Step 2

The present value of the returns is highest amount we will be willing to pay for the purchase o the share of a company.

Hence, the option C is correct.

Step 3

Currency Board:

Currency Board is a medium or institution that helps countries to convert their currencies at a fixed rate into a reserved asset. The currency board should have 100% reserves of foreign currency which provides full convertibility.

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