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The current price of a stock is 25. The stock pays quarterly dividend of 0.02 with the first dividend being paid 2 months from now.
The current price of a stock is 25. The stock pays quarterly dividend of 0.02 with the first dividend being paid 2 months from now. The continuously compounded riskfree interest rate is 5% per year. Suppose the investors in this stock demand to be compensated for risk. What is (a) the minimum possible value of the expected stock price 3 years from now, and (b) the corresponding continuously compounded rate of return per year in the 3-year horizon?
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