$-$Sum$-$ECONS$-320-$ONLIN$-1-$G$01-01584-$Money and Banking

Crystal Chaudha

Test: Chapter $7-A$

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Question $8$ of $24$

This test: $24$ point$($s$)$ possible

This question: $1$ point$($s$)$ possible

The current price of a stock is $$56\mathrm{.}66.$ If dividends are expected to be $$1\mathrm{.}20$ per share for the next five years, and the required return is $9\%,$ then what should the price of the stock be in $5$ years when you plan to sell it$?$

The price $5$ years from now will be $$.($Round your response to the nearest dollar.$)$

If the dividend and required return remain the same, and the stock price is expected to increase by $$1$ five years from now, does the current stock price also increase by $$1?$

A$.$ Yes, the current stock price will increase by $$1$ because the current stock price should not be discounted by the required return.

B$.$ No$,$ the current stock price will not increase by $$1$ because the future stock price is discounted by the required return.

C$.$ The answer is uncertain as stock prices can be very unpredictable.