Suppose that a stock is expected to pay a $11 dividend at the end of this year and that your required return on equity investments is 99 %. Using a one-period model of stock price determination, if you expect to sell a stock you buy today a year later for $17.017.0 , you will be willing to pay for the stock the amount $nothing. (Round your response to the nearest two decimal places.)

If we expect to a 99% return on a stock, the dividend plus the capital gains on it should be 99% more than the original price of the stock. For example if a stock sells for $150 one year from now and gives a dividend of $49, we would be willing to pay$ 100 for it if we require a 99% return because $49 + (150-100) is 99% of $100. So in this case we can use an equation

Sale price - Buying Price + Dividend = 99% of Buying price

17.017 - Buying Price + 11 = 0.99Buying Price

17.017 + 11 = 1.99 Buying Price

28.017 = 1.99 Buying Price

Buying Price = 28.017/1.99

Buying Price = 14.07

We can also Check our answer if its correct by checking if the capital gains plus dividend is 99% of the buying price.

17.017-14.07 + 11=13.947

13.947/14.07 = 0.99

=99%

This proves that our answer is correct.