What Is the Required Rate of Return on a Share

question 38

Multiple Choice

What is the required rate of return on a share that is expected to pay a constant dividend of $4.50 in perpetuity and is priced at $47.50?

• A)10.31%
• B)7.98%
• C)11.43%
• D)9.47%

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Definitions:

Promissory Note

A financial instrument that contains a written promise by one party to pay another party a definite sum of money either on demand or at a specified future date.

Negotiable

Able to be transferred or endorsed to another party in exchange for money or as part of a contractual agreement.

Medium of Exchange

An intermediary instrument used to facilitate the sale, purchase, or trade of goods and services between parties.

Negotiable

Capable of being discussed in order to reach an agreement or capable of being transferred by endorsement or delivery.