Answer:
Correct option is 6.59
Explanation:
Selling price of stock at the end of the year is $6.99. Annual return rate is 6%. Price of stock at the beginning will be present value of stock valued at the end discounted at 6%. Computation is as shown below:
[tex]Present\ value\ or\ price\ of\ stock = Selling\ price\left ( \frac{1}{1+i} \right )^{n}[/tex]
[tex]= 6.99\left ( \frac{1}{1+0.06} \right )^{1}[/tex]
[tex]= \frac{6.99}{1.06}[/tex]
= $6.59
Therefore, Stock's price in the beginning of the year is $6.59.
