Interest Rate and Present Value Question
I'm trying to answer the hypothetical question posted below (for educational purposes) but I'm very confused about its wording regarding the interest rate. If I assume that the interest is compounded monthly (I'm guessing this is what the question is trying to state), I obtain that the value of today is equivalent to .05^3 three months from now, hence the present value of the stock is /1.05^3 and so the quoted price for two months from now is going to be /1.05 multiplying through by 1.05^2. Is this the correct interpretation? I'm just lost in terminology, obviously this isn't even a math question really.
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