Macroeconomics

Learn the toughest concepts covered in your Macroeconomics class with step-by-step video tutorials and practice problems.

The Financial System

Calculating Bond and Stock Prices

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Calculating Stock and Bond Price

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Problem

Stock Price = Divident (i - g) Where i = discount rate and g = dividend growth rate.

A stock currently pays a dividend of $1 per share. Dividends are expected to increase at a rate of 5% per year, while the discount rate is 8%. What is the current price of the stock?