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    jabsher's Avatar
    jabsher Posts: 2, Reputation: 1
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    #1

    Feb 17, 2010, 03:30 PM
    Required Rate of Return on a Stock
    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's Avatar
    ArcSine Posts: 969, Reputation: 106
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    #2

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

    r = + g

    Give that one a spin and you'll get it.
    jabsher's Avatar
    jabsher Posts: 2, Reputation: 1
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    #3

    Feb 18, 2010, 04:13 PM
    Got it thanks!
    madhumadhi's Avatar
    madhumadhi Posts: 1, Reputation: 1
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    #4

    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
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