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Smith buys 100 shares of stock ABC at the same time Brown buys 100 shares of stock XYZ. Both stocks are bought for 10
Smith buys 100 shares of stock ABC at the same time Brown buys 100 shares of stock XYZ. Both stocks are bought for 10 per share. Smith receives a dividend of .80 per share, payable at the end of each year, for 10 years, at which time (just after receiving the 10th dividend) he sells his stock for 2 per share. Smith in- vests his dividends at annual rate 6%, and invests the proceeds of the sale of his stock at the same rate. Brown receives no divi- dends for the first 10 years, but starts receiving annual dividends of .40 per share at the end of 11 years. Brown also invests his dividends in an account earning 6%. If Brown sells his shares n years after purchase, what should be the sale price per share in order that his accumulated investment matches that of Smith, for each of n =15, 20 and 25?
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