Assume That You Plan to Buy a Share of XYZ

Multiple Choice

Assume that you plan to buy a share of XYZ stock today and to hold it for 2 years. Your expectations are that you will not receive a dividend at the end of Year 1, but you will receive a dividend of $9.25 at the end of Year 2. In addition, you expect to sell the stock for $150 at the end of Year 2. If your expected rate of return is 16 percent, how much should you be willing to pay for this stock today?

A) $164.19
B) $ 75.29
C) $107.53
D) $118.35
E) $131.74