An Issue of Ordinary Shares Currently Sells for $40

question 26

Multiple Choice

An issue of ordinary shares 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 [blank].

• A)5%
• B)10.25%
• C)13.11%
• D)10%