The current yield on Zeta's common stock is 5.6%. The company pays a constant dividend of $1.80. What is the required rate of return on Zeta's stock?

Question

Quizplus · Accepted Answer

The current yield is essentially the return an investor would expect from the dividend relative to the price of the stock. Since the question states the current yield is 5.6%, and no other factors are introduced that would alter the return rate from the dividend, the required rate of return on Zeta's stock would also be 5.6%.

The Current Yield on Zeta's Common Stock Is 5