The stock and bond has the same rate of return

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Reference no: EM132006283

You have two asset choices. One is buying a share of Dell stock today, you will be able to sell it in 5 years for $50. You will also receive a $2 dividend at the end of each of those 5 years. Another choice is paying $45 to buy a risk-free bond today, the yield rate of bond is 10% and you will sell it in 5 years. Suppose the interest rate(discount rate) is 12% for both assets, which asset will you choose?

A. Stock

B. Bond

C. The stock and bond has the same rate of return, so we are indifferent between these two assets.

Reference no: EM132006283

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