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Can someone help me in figuring out this question?
June 2008 question 1A, how did they come by the figure of 1.06
when they were calculating the “share price in 6 years time”Thanks
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Hi
It states that the share price is expected to rise at a rate of 6% = 6/100 = 0.06. Therefore if the share price is $5.50 (t0) then in 1 years time (t1) it will be 6% more so you need to multiply the share price by 106% ie 1.06.
to = 5.50
t1 = 5.50 x 1.06 = 5.83
t2 = 5.83 x 1.06 = 6.18
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t6 = 5.50 x 1.06^6 = 7.80Sarah
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