A Stock Is Currently Priced at $17

question 90

Multiple Choice

A stock is currently priced at $17.65 and is expected to pay an annual dividend of $1.50 next year. If the dividends are expected to grow at 4 percent per year forever, what is the required return on the stock?

• A) 13.08%
• B) 14.01%
• C) 16.21%
• D) 15.13%
• E) 12.50%

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Definitions:

Probability

The determination of how probable an event is, denoted as a number from 0 to 1.

Uniform Density

Uniform density refers to a type of distribution in which every outcome in a range has an equal probability of occurring, often represented in physics and probability theory.

Probability

A quantification of the chance that a specific event happens, represented as a number ranging from 0 to 1.

Poisson Approximation

A methodology in statistics used to approximate the probability of a given number of events happening in a fixed interval of time or space.