# A company just paid a dividend of $1.50 per share on its stock. The dividends are expected to grow at a constant rate of 4 percent per year indefinitely. a. If investors require a return of 8 percent on the company’s stock, what is the current price? What will the price be in three years? b. If investors require a return of 10 percent on the company’s stock, what is the current price? c. In light of your answers to part a and part b, what is the relationship between a stock’s price and the required rate of return? Please use a HP10bii+ Financial Calculator Question A company just paid a dividend of$1.50 per share on its stock. The dividends are expected to grow at a constant rate of 4 percent per year indefinitely.

a. If investors require a return of 8 percent on the company’s stock, what is the current price? What will the price be in three years?

b. If investors require a return of 10 percent on the company’s stock, what is the current price?

c. In light of your answers to part a and part b, what is the relationship between a stock’s price and the required rate of return?

Please use a HP10bii+ Financial Calculator

### Want to see this answer and more?

Experts are waiting 24/7 to provide step-by-step solutions in as fast as 30 minutes!*

*Response times may vary by subject and question complexity. Median response time is 34 minutes for paid subscribers and may be longer for promotional offers.
Tagged in