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What is the required rate of return on the stock

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Reference no: EM132467291

Question 1: The Retarded Company's dividends are declining at an annual rate of 8 percent. The company just paid a dividend of $4 per share. You require a 16 percent rate of return. How much will you pay for this stock?

A.$12.57

B.$15.33

C.$13.85

D.$17.09

E.$21.78

F.$19.20

Question 2: A stock has a beta of 1.5. The pure rate of interest is 2.75 percent and investors require a 3 percent inflation premium. What is the required rate of return on this stock if the market risk premium is 6 percent? (Hint: First, calculate the risk-free rate using the pure rate and the inflation premium. Next, use this risk-free rate to find the required return on the stock.)

A.15.7%

B.17.4%

C.13.7%

D.14.8%

E.12.9%

F.16.5%

Reference no: EM132467291

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