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Suppose you know with certainty that the Clark Capital Corporation will pay a dividend of $10 per share on every January 1 forever. The continuously compounded risk-free rate is 5% (also forever).

a) Graph the price path of the Clark Capital common stock over time.

b) Is this (highly artificial) example a random walk? A martingale? A sub martingale? (Why?)

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92003104

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