Math question Help Needed

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Business Finance

Question Description

A firm stock price is $25 per share and is expected to grow at a 5% compound annual rate. What should the stock price per share be in 5 years?

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Explanation & Answer

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calculate the compounded figure after 5 years.

Principal equivalent is $25 and rate is 5% annually

The final value should be

A=P(1+ r/n) ^nt

P = principal amount (the initial amount you borrow or deposit)

r  = annual rate of interest (as a decimal)

t  = number of years the amount is deposited or borrowed for.

A = amount of money accumulated after n years, including interest.

n  =  number of times the interest is compounded per year 

=25(1+0.05) ^1 X5

=25 x (1.05)^5

=25 x 1.27628156 

= 31.9070391 

The value will be $31.9070391

Please let me know if you need any clarification. Thanks for the question

avpubynfXvz (1253)
Carnegie Mellon University

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