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If the expected total return return of a stock is 14%, the dividend yield is 3%, and the current price is $40.
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