A Stock Has a Current Annual Dividend of $6

question 44

Multiple Choice

A stock has a current annual dividend of $6.00 per year and it is expected to grow by 3% (0.03) a year.It is expected that two years from now the stock will sell for $90.00 a share.If the interest rate is 5% (0.05) , the dividend discount model predicts the stock's current price should be:

• A)$94.90
• B)$93.12
• C)$101.30
• D)$94.30

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