Use of Financial Calculator TI BA II Plus required. What would you pay for a stock whose price you estimate will be $50 in ten years and you wish to earn a return on the investment of 9 percent? Ignore brokerage commissions and tax implications and assume that the stock paid no dividends during the holding period.

Question

Quizplus · Accepted Answer

To calculate the present value of the stock, we need to use the present value formula:
PV = FV / (1 + r)^n
Where:
PV = present value
FV = future value = $50
r = required rate of return = 9%
n = number of periods = 10 years

Plugging in these values, we get:
PV = $50 / (1 + 0.09)^10
PV = $21.10

Therefore, the maximum price to pay for the stock today would be $21.10, which is option C.

Use of Financial Calculator TI BA II Plus Required