expected return on Natter Corporation's stock is 14%.The stock's dividend is expected to grow at a constant rate of 8%, and it currently sells for $50 a share.Which of the following statements is CORRECT?
A)The stock's dividend yield is 7%.
B)The stock's dividend yield is 8%.
C)The current dividend per share is $4.00.
D)The stock price is expected to be $54 a share one year from now.
E)The stock price is expected to be $57 a share one year from now.

Question

Quizplus · Accepted Answer

The expected return is the sum of the dividend yield and the growth rate. With a 14% expected return and an 8% growth rate, the dividend yield is 6%. The stock price one year from now is expected to be $50 * (1 + 0.08) = $54.

Expected Return on Natter Corporation's Stock Is 14