Your question asks what would be the current stock price.
In order to find the solution to your question, we're going to need to find how much growth the stock made in 3 years, and see how much it grew by 6% after the 3 years. WE also need to calculate the "rs" into the stock price.
Lets solve:
D = Dividend
(Numbers next to D) = Years
[tex]D0 = 1.25\\\\ \text {We would multiply 1.25 by 1.15}\\D1 = 1.25*1.15 = 1.44\\\\D2 = 1.44*1.15 = 1.66\\\\D3 = 1.66*1.15 = 1.91\\\\ \text {We would now multiply by 1.06}\\\\D4 = 1.91*1.06 = 2.02\\\\\text {Price of stock at end of Year 3} = (2.02)/(.11-.06) = 40.40\\\\\text {Current Price of the stock} = \\1.44/1.11 + 1.66/(1.11^2) + (1.91+40.40)/(1.11^3) = 33.58[/tex]
Once you're done solving, you should get 33.58. Since it's not an answer choice, we'll just choose the one that's close to it.
Therefore, you should get the answer D). $33.50
Answer choice D). $33.50 should be your FINAL answer.
