Question

During 2021, COALNORE mining company discover new fields reach in Coal and Iron ore in Queensland consequently the stock of the company is expected to be $150 in one year. If the stock pays no dividends, and the required return is 10%, What price the efficient market hypothesis indicates is expected for today?

Answer 1

The efficient market hypothesis suggests that the expected price for today is approximately $136.36.

Step-by-step explanation:

The efficient market hypothesis suggests that the price of a stock should reflect all available information and expectations about the future. In this case, the expected stock price in one year is $150. With a required return of 10%, we can use the formula for present value to calculate the expected price for today.

P0 = P1 / (1 + r)

where P0 is the expected price today and P1 is the expected price in one year. Plugging in the values, we get:

P0 = $150 / (1 + 0.10) = $136.36

Therefore, according to the efficient market hypothesis, the expected price for today is approximately $136.36.