A company is expected to pay a dividend of $4.50 per share next year (t=1) and the dividend is expected to grow at a constant rate of 6% forever. The stock is currently selling for $50. Given this information, what is the required rate of return for this stock?

 

  A 3.5 percent treasury bond with semi-annual repayments (with par value of $100) with 16.5 years left to maturity is currently offered for sale at $102.3. What is the semi-annually compounded yield to maturity of the bond?

Note: Please express your result as a percentage and keep two digits after the decimal point (e.g., 12.34% or 1.23%). Please show all steps.

Answer rating: 100% (QA)

To calculate the required rate of return for the stock we can use the Gordon Growth Model formula Re... View the full answer