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Get Full Access to College Algebra - 9 Edition - Chapter 9.3 - Problem 99
Get Full Access to College Algebra - 9 Edition - Chapter 9.3 - Problem 99

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# Stock Price One method of pricing a stock is to discount the stream of future dividends

ISBN: 9780321716811 485

## Solution for problem 99 Chapter 9.3

College Algebra | 9th Edition

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College Algebra | 9th Edition

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Problem 99

Stock Price One method of pricing a stock is to discount the stream of future dividends of the stock. Suppose that a stock pays per year in dividends and, historically, the dividend has been increased i% per year. If you desire an annual rate of return of r%, this method of pricing a stock states that the price that you should pay is the present value of an infinite stream of payments: The price of the stock is the sum of an infinite geometric series. Suppose that a stock pays an annual dividend of \$4.00 and, historically, the dividend has been increased 3% per year. You desire an annual rate of return of 9%. What is the most you should pay for the stock?

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