A Common Stock Paid a Dividend at the End of Last

Multiple Choice

A common stock paid a dividend at the end of last year of $3.50. Dividends have grown at a constant rate of 6 percent per year over the last 20 years,and this constant growth rate is expected to continue into the future. The stock is currently selling at a price of $35 per share. What is the expected rate of return on this stock?

A) 18.7 percent
B) 22.5 percent
C) 16.6 percent
D) 8.4 percent
E) None of these choices are correct.