What Would Be the Approximate Expected Price of a Stock

question 100

Multiple Choice

What would be the approximate expected price of a stock when dividends are expected to grow at a 25% rate for 3 years, then grow at a constant rate of 5%, if the stock's required return is 13% and next year's dividend will be $4.00?

• A) $67.60
• B) $62.08
• C) $68.64
• D)$73.44

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Definitions:

Compounded Monthly

The method of computing interest that includes both the original amount and the interest earned in past months, applied each month.

Compounded Annually

The process where interest is calculated once per year and added to the principal, affecting future interest calculations.

Trust Fund

A legal entity created to hold assets for the benefit of a particular person, group, or organization, managed by a trustee.

Rate Of Return

A measure of the profit or loss of an investment over a given period, typically expressed as a percentage of the investment's initial cost.