Question

A stock with a beta of 1.3 just paid a dividend of $1.10 and is priced at $35. If the risk-free rate is 2% and the market risk premium is 6%, what is the expected growth rate for the stock? A. 4.08% B. 3,93% O G. 6.6% OD. 6.45%

Answer 1

Answer 6.45% Po = D(1+g). ke-g where, Po = D = g = Cument Price = $35 Dividend just paid = $ 140 growth rate Required rate of return = RF + = 2 + 9.8% Ke = Rom-RF) B (6) 1-3 $35 = 1.10 (1+9) 0.098 - g 7 1 6.45%)

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