An Issue of Common Stock Is Expected to Pay a Dividend

question 99

Multiple Choice

An issue of common stock is expected to pay a dividend of $3 at the end of the year. Its growth rate is equal to 3%, and the current share price is $40. What is the required rate of return on the stock?

• A) Between 7% and 10%
• B) Between 10% and 12%
• C) Between 12% and 14%
• D) Between 14% and 17%

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