Current price and holding period
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How would the price of a share of stock vary with the time an investor prefers to hold the stock? That is, suppose you have a planned holding period of 3 years and someone else has a planned holding period of 5 years. How would that affect the current price of the stock? Explain.
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Solution Summary
The solution explains the impact of holding period on the current price of a stock.
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The holding period does not make a difference to the current price of a stock.
The current price of a stock is the present value of all dividends (the cash flows that the person would expect from the stock). Let us see the current value for someone with a holding period of 3 years. For this person, the price ...
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