The price of a stock at Year 3 can be expressed as: a. $$ D_{0} imes(1+R)^{5} $$. b. $$ D_{4} /(R-g) $$. c. $$ D_{0} /\left(R+g_{4} ight) $$. o d. $$ D_{5} /(R-g) $$ e. $$ D_{1} imes(1+R)^{5} $$.

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The price of a stock at Year 3 can be expressed as: a. $$ D_{0} 	imes(1+R)^{5} $$. b. $$ D_{4} /(R-g) $$. c. $$ D_{0} /\left(R+g_{4}ight) $$. o d. $$ D_{5} /(R-g) $$ e. $$ D_{1} 	imes(1+R)^{5} $$.

UpStudy AI · Accepted Answer

$$ P_3 $$ represents the price of the stock at Year 3. According to the Gordon Growth (Dividend Discount) Model, the price of a stock at time $$ n $$ is given by

$$
P_n = \frac{D_{n+1}}{R - g}
$$

where  
$$\; D_{n+1} $$ is the dividend expected at Year $$ n+1 $$,  
$$\; R $$ is the required rate of return, and  
$$\; g $$ is the constant growth rate of dividends.

For Year 3, the dividend to use is the one expected at Year 4 (i.e. $$ D_4 $$). Thus,

$$
P_3 = \frac{D_4}{R - g}
$$

Comparing with the given options, the expression $$ \frac{D_4}{R - g} $$ corresponds to option b.

The answer is  
b. $$ \frac{D_4}{R - g} $$.
The price of the stock at Year 3 is $$ \frac{D_4}{R - g} $$.

The price of a stock at Year 3 can be expressed as: a. \( D_{0} \times(1+R)^{5} \). b. \( D_{4} /(R-g) \). c. \( D_{0} /\left(R+g_{4}\right) \). o d. \( D_{5} /(R-g) \) e. \( D_{1} \times(1+R)^{5} \).

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