An Issue of Common Stock Currently Sells for $40

question 44

Multiple Choice

An issue of common stock currently sells for $40.00 per share, has an expected dividend to be paid at the end of the year of $2.00 per share, and has an expected growth rate to infinity of 5% per year. The expected rate of return on this security is

• A) 5%.
• B) 10.25%.
• C) 13.11%.
• D) 10%.

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