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The current dividend yield on CD's common stock is 1.89 percent. The company just paid an annual dividend of $1.56 and announced plans to pay $1.70 next year. The dividend growth rate is expected to remain constant at the current level. What is the required rate of return on this stock

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chilljain33

The required rate of return on the stock of CD will be 10.86%.

What is rate of return?

The capital gains made from investment in such asset class(s) over a specific period is the rate of return of such investment. In the above case, the rate of return using the given values will be,

[tex]\rm Rate\ of\ Return= Growth\ Rate+ Dividend\ Yield\\\\\rm Rate\ of\ Return= 0.0897+0.018\\\\\rm Rate\ of\ Return= 0.1086[/tex]

Hence, the required rate of return is calculated as 10.86%.

Learn more about rate of return here:

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