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Factors affecting the price of a stock

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Two people agree on the riskiness of a stock, they also agree on the expected value of D1 and on the expected future dividend growth rate. One person normally holds stocks for 2 years, while the other normally holds stocks for 10 years. Should both be willing to pay the same price for the stock. Why or why not?

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Solution Summary

Price of a stock depends upon various factors. Solution lists these factors and discusses if the holding period has any impact on stock price.

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The current value of a stock is the sum of PV's of all future dividend.

PV's of dividend will depend upon:
1. Expected dividend next year
2. ...

Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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