The Current Yield on Alpha's Common Stock Is 4

question 29

Multiple Choice

The current yield on Alpha's common stock is 4.8%. The company just paid a $2.10 dividend. The speculation is that the dividend will be $2.205 next year. The dividend growth rate is expected to remain constant at the current level. What is the required rate of return on Alpha's stock?

• A) 10.04%
• B) 16.07%
• C) 21.88%
• D) 43.75%
• E) 45.94%

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Definitions:

Autotrophs

Organisms that produce their own food from inorganic substances using light or chemical energy, such as plants and some bacteria.

Pigment

Substances that give color to living organisms, such as chlorophyll in plants or melanin in human skin.

Light

Light is electromagnetic radiation within a portion of the electromagnetic spectrum that can be perceived by the human eye, responsible for the sense of sight.

Chemical Energy

Energy stored in the bonds of chemical compounds and released in a chemical reaction, often producing heat as a by-product.