{"id":56095,"date":"2024-04-16T00:38:42","date_gmt":"2024-04-16T00:38:42","guid":{"rendered":"https:\/\/exam.pscnotes.com\/mcq\/?p=56095"},"modified":"2024-04-16T00:38:42","modified_gmt":"2024-04-16T00:38:42","slug":"an-expected-dividend-yield-is-5-5-and-expected-rate-of-return-is-11-5-then-constant-growth-rate-would-be","status":"publish","type":"post","link":"https:\/\/exam.pscnotes.com\/mcq\/an-expected-dividend-yield-is-5-5-and-expected-rate-of-return-is-11-5-then-constant-growth-rate-would-be\/","title":{"rendered":"An expected dividend yield is 5.5% and expected rate of return is 11.5% then constant growth rate would be"},"content":{"rendered":"<p>\r\n    <!-- Check if it's an AMP page -->\r\n            <!-- Non-AMP version -->\r\n        <div class=\"mcq-container\" data-quiz-id=\"quizState_6a9750e32c61a\">\r\n                                            <div class=\"option\" data-option-key=\"option1\" data-is-correct=\"true\">\r\n                    2.09%                <\/div>\r\n                                            <div class=\"option\" data-option-key=\"option2\" data-is-correct=\"false\">\r\n                    -6.00%                <\/div>\r\n                                            <div class=\"option\" data-option-key=\"option3\" data-is-correct=\"false\">\r\n                    17.50%                <\/div>\r\n                                            <div class=\"option\" data-option-key=\"option4\" data-is-correct=\"false\">\r\n                    6.00%                <\/div>\r\n                            \r\n            <!-- Feedback messages for non-AMP -->\r\n            <div class=\"feedback\" data-feedback=\"wrong\">Answer is Right!<\/div>\r\n            <div class=\"feedback\" data-feedback=\"right\">Answer is Wrong!<\/div>\r\n        <\/div>\r\n\r\n        <script>\r\n        document.addEventListener('DOMContentLoaded', function () {\r\n            var containers = document.querySelectorAll('.mcq-container');\r\n\r\n            containers.forEach(function(container) {\r\n                var options = container.querySelectorAll('.option');\r\n                var feedbackSelect = container.querySelector('[data-feedback=\"select\"]');\r\n                var feedbackWrong = container.querySelector('[data-feedback=\"wrong\"]');\r\n                var feedbackRight = container.querySelector('[data-feedback=\"right\"]');\r\n\r\n                options.forEach(function(option) {\r\n                    option.addEventListener('click', function() {\r\n                        var selectedOption = option.getAttribute('data-option-key');\r\n                        var isCorrect = option.getAttribute('data-is-correct') === 'true';\r\n\r\n                        \/\/ Remove previous selections\r\n                        options.forEach(function(opt) {\r\n                            opt.classList.remove('correct', 'incorrect');\r\n                        });\r\n\r\n                        \/\/ Add the correct\/incorrect class\r\n                        if (isCorrect) {\r\n                            option.classList.add('correct');\r\n                            feedbackRight.hidden = false;\r\n                            feedbackWrong.hidden = true;\r\n                        } else {\r\n                            option.classList.add('incorrect');\r\n                            feedbackRight.hidden = true;\r\n                            feedbackWrong.hidden = false;\r\n                        }\r\n\r\n                        \/\/ Hide select feedback\r\n                        feedbackSelect.hidden = true;\r\n                    });\r\n                });\r\n            });\r\n        });\r\n        <\/script>\r\n    \r\n    <!--more--><\/p>\n<p>The correct answer is A. 2.09%.<\/p>\n<p>The dividend growth model is a valuation model that calculates the value of a stock based on the expected future dividends and the required rate of return. The model is based on the assumption that the company will continue to pay dividends at a constant growth rate in the future.<\/p>\n<p>The formula for the dividend growth model is:<\/p>\n<p>P0 = D1 \/ (r &#8211; g)<\/p>\n<p>where:<\/p>\n<p>P0 = the current price of the stock<\/p>\n<p>D1 = the expected <div class=\"youtube-subscribe-container\">\r\n        <a href=\"https:\/\/www.youtube.com\/channel\/UCNHT8lW-JmLC68rjBfZhdkg?sub_confirmation=1\" target=\"_blank\" class=\"youtube-subscribe-button\">\r\n            <span class=\"youtube-icon\">\r\n                <svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" viewBox=\"0 0 576 512\">\r\n                    <path d=\"M549.7 124.1c-6.3-23.7-24.8-42.3-48.3-48.6C458.8 64 288 64 288 64S117.2 64 74.6 75.5c-23.5 6.3-42 24.9-48.3 48.6-11.4 42.9-11.4 132.3-11.4 132.3s0 89.4 11.4 132.3c6.3 23.7 24.8 41.5 48.3 47.8C117.2 448 288 448 288 448s170.8 0 213.4-11.5c23.5-6.3 42-24.2 48.3-47.8 11.4-42.9 11.4-132.3 11.4-132.3s0-89.4-11.4-132.3zm-317.5 213.5V175.2l142.7 81.2-142.7 81.2z\"\/>\r\n                <\/svg>\r\n            <\/span>\r\n            Subscribe on YouTube\r\n        <\/a>\r\n    <\/div> <div class=\"telegram-channel-container\">\r\n        <a href=\"https:\/\/t.me\/pscnotes2025\" target=\"_blank\" class=\"telegram-channel-button\">\r\n            <span class=\"telegram-icon\">\r\n                <svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" viewBox=\"0 0 496 512\">\r\n                    <path fill=\"white\" d=\"M248,8C111,8,0,119,0,256s111,248,248,248s248-111,248-248S385,8,248,8z M362,177L320,367c-3,14-10,18-20,14l-56-41l-27,26 c-3,3-5,5-10,5l4-63L323,196c5-5-1-7-8-3l-98,62l-42-13c-9-3-10-9,2-14l162-63C351,160,365,164,362,177z\"\/>\r\n                <\/svg>\r\n            <\/span>\r\n            Join Our Telegram Channel\r\n        <\/a>\r\n    <\/div> dividend per share in the next year<\/p>\n<p>r = the required rate of return<\/p>\n<p>g = the constant growth rate<\/p>\n<p>In this case, the expected dividend yield is 5.5% and the expected rate of return is 11.5%. Therefore, the constant growth rate is:<\/p>\n<p>g = (r &#8211; D1 \/ P0)<\/p>\n<p>= (11.5% &#8211; 5.5%)<\/p>\n<p>= 2.09%<\/p>\n<p>Therefore, the correct answer is A. 2.09%.<\/p>\n<p>Option B is incorrect because the constant growth rate cannot be negative. A negative growth rate would indicate that the company&#8217;s dividends are expected to decrease in the future.<\/p>\n<p>Option C is incorrect because the constant growth rate cannot be greater than the required rate of return. If the constant growth rate were greater than the required rate of return, then the value of the stock would be infinite.<\/p>\n<p>Option D is incorrect because the constant growth rate cannot be equal to the required rate of return. If the constant growth rate were equal to the required rate of return, then the value of the stock would be zero.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Join Our Telegram Channel Subscribe on YouTube<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[945],"tags":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v22.2 (Yoast SEO v23.3) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>An expected dividend yield is 5.5% and expected rate of return is 11.5% then constant growth rate would be<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/exam.pscnotes.com\/mcq\/an-expected-dividend-yield-is-5-5-and-expected-rate-of-return-is-11-5-then-constant-growth-rate-would-be\/\" \/>\n<meta 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