Question
IBM stock has following probability distribution of expected prices one year from now. State Prob Price 1 .25 $50 2 .40 $60 3 .35 $70
IBM stock has following probability distribution of expected prices one year from now.
| State | Prob | Price |
| 1 | .25 | $50 |
| 2 | .40 | $60 |
| 3 | .35 | $70 |
If a risk premium of 5% is required and the risk free rate is 4%, what is the price you would be willing to pay today for the IBM stock? Assume the stock will pay a dividend of $4 per share.
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Cases In Healthcare Finance
Authors: George H. Pink, Paula H. Song
7th Edition
1640553177, 978-1640553170
