ABC Corporation's Common Stock Dividend Yield Is 2

question 3

Multiple Choice

ABC Corporation's common stock dividend yield is 2.1%, it just paid a dividend of $1, and is expected to pay a dividend of $1.07 one year from now. Dividends are expected to grow at a
Constant rate indefinitely. What is the required rate of return on ABC stock?

• A) 9.0%
• B) 9.1%
• C) 9.3%
• D) 10.6%
• E) 11.2%

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Definitions:

Decrease

A reduction in size, quantity, or degree of something.

Substitutes

Goods or services that can be used in place of one another, where an increase in the price of one leads to an increase in demand for the other.

Demand Curve

A graphical representation showing the relationship between the price of a good and the quantity demanded by consumers at various prices.

Price

The amount of money required to purchase a good or service, determined by factors such as demand and supply.