What would you pay for a stock whose price you estimate will be $50 in 10 years and you wish to earn a return on the investment of 9% per year?
Ignore brokerage commissions and tax implications and assume the stock pays no dividends during the holding period.
A) $45
B) $41
C) $21.10
D) $15
Answer: C
Explanation: C) $50 × 0.422 (PV of $1, 10 periods, 9%) = $21.10
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