Return on Stocks, YTM of bonds
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An issue of common stock is expected to pay a dividend of $4.0 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%
An issue of common stock is selling for $57.20. The year end dividend is expected to be $2.32 assuming a constant growth rate of 6%. What is the required rate of return?
a) 10.3%
b) 10.1%
c) 4.1%
d) none of the above
What is the approximate yield to maturity for a seven-year bond that pays 11% interest on a $1000 face value annually if the bond sells for $952
a) 10.5%
b) 10.6%
c) 11.9%
d) 12.0%
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Solution Summary
The solution calculates the required rate of return on stocks, and approximate yield to maturity for a bond
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Stock and bond questions
An issue of common stock is expected to pay a dividend of $4.0 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%
Answer: c) between 12% and 14%
Po= Div1/ ...
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