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Calculate the price of a stock that has a two-year horizon

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Calculate the price of a stock that has a two-year horizon, and is expected to pay a dividend of $5.50 per share during the first year, and $6.50 per share for the second year. The following prices and associated probabilities are forecast for the end of the two-year period:

Probability

0.15

0.25

0.1

0.3

0.2

Price

$25

$35

$50

$70

$85

The return on comparable stocks is 11%.

Reference no: EM132285065

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