A common stock is expected to pay dividends of one at the end of the next five years and two for each of the following five years. The dividends are expected to grow at a fixed rate of 2% per year thereafter. Assume an annual effective interest rate of 6%.

Calculate the price of this stock using the dividend discount model.

Possible Answers

A

29

B

33

C

37

D

39

E

41

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