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View Full Version : Required Rate of Return on a Stock


jabsher
Feb 17, 2010, 03:30 PM
What is the required rate of return on a stock with $2.5 expected dividend and a $19 price with a 7% growth?
I calculated by R=D/P-G and got 13% but the answer is 20.16% How is the answer 20.16%?

ArcSine
Feb 18, 2010, 09:32 AM
Solving for r the growth model is

r = \frac{D}{P} + g

Give that one a spin and you'll get it.

jabsher
Feb 18, 2010, 04:13 PM
Got it thanks!

madhumadhi
Sep 2, 2010, 03:53 AM
Stock has a beta of 1.2. risk-free rate is 6% and the expected market rate of return is 12%. Determine the required rate of return on the stock