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    Finance: Expected market price.

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    1. Calculate the price of a stock that has a one-period horizon, is expected to pay a dividend of $.20 per share for the period, with the following prices and associated probabilities forecast at the end of the period:

    Probability 0.3 0.1 0.2 0.3 0.1
    Price $40 $45 $55 $62 $70

    The return on comparable stocks is 8%.

    2. Calculate the price of a stock with a three-year horizon, when the stock is expected to pay $2.50 per share in dividends each year, and has an expected value of $100 at the end of the third year. The return on comparable stocks is 6%.

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    https://brainmass.com/economics/estimation-and-forecasting/finance-expected-market-price-390509

    Solution Summary

    The problem deals with estimating market price with provided provabilities.

    $2.19