A stock is expected to pay a dividend of $0.75 at the end of the year. The required rate of return is rs = 10.5%, and the expected constant growth rate is g = 7%. What is the stock's current price? Select the correct answer. a. $22.03 b. $21.43 c. $20.83 d. $20.23 e. $19.6

A stock is expected to pay a dividend of $0.75 at the end of the year. The required rate of return is rs = 10.5%, and the expected constant growth rate is g = 7%. What is the stock's current price? Select the correct answer. a. $22.03 b. $21.43 c. $20.83 d. $20.23 e. $19.6

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Question

A stock is expected to pay a dividend of $0.75 at the end of the year. The required rate of return is r_s = 10.5%, and the expected constant growth rate is g = 7%. What is the stock's current price?

Select the correct answer.

a. $22.03

b. $21.43

c. $20.83

d. $20.23

e. $19.63

Definition Definition Percentage gain or loss from a specific investment over time. The rate of return is the difference between the closing and initial values of an investment divided by the initial value of the investment. The closing value includes any intermediate cash flows such as dividends or interest amounts.

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