Suppose the Dividend Paid on a Share Takes One of Four

Multiple Choice

Suppose the dividend paid on a share takes one of four values, each with equal probability: $0.00, $0.08, $0.28 and $0.60. The share trades for 15 periods. You have chosen to implement a flat fundamental value of $4.80 for this share. This means that you must set the interest rate on cash holdings at:

A) $10%.
B) $25%.
C) $0%.
D) $5%.