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1. Calculate the price of a stock that has a two-year horizon, and is expected to pay a dividend of $5.50 per share during the
1.Calculate the price of a stock that has a two-year horizon, and is expected to pay a dividend of $5.50 per share during the first year, and $6.50 per share for the second year. The following prices and associated probabilities are forecast for the end of the two-year period:
Probability
0.15
0.25
0.1
0.3
0.2
Price
$25
$35
$50
$70
$85
The return on comparable stocks is 11%.
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