If The Expected Total Return Return Of A Stock Is 14 The Dividend Yield Is 3 And

/in /by

If the expected total return return of a stock is 14%, the dividend yield is 3%, and the

current price is $40. The market risk premium is 7% and risk free rate is 5%, assume the

stock is in equilibrium.

A. What is the expected one year future price? 2pts. Show all work.

.14 = .03 + (P1 – $40/$40)

.11 = p1 – $40 / $40

P1 = $44.40

I don’t understand the formula

 
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