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Basic Question 4 of 7
An analyst has gathered the following data to analyze a stock.
- Current stock price: $20.
- Expected price at the end of the next period: $22.
- Current period earnings: $2.
- Expected next period's earnings: $2.2.
- Stable earnings growth rate to infinity: 6%.
- Stable payout ratio: 50%.
- Beta: 1.2.
- Required rate of return: 12%.
Suppose now is the end of the current period. What is the expected rate of return for the next period?
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Learning Outcome Statements
calculate and interpret the value of a common stock using the dividend discount model (DDM) for single and multiple holding periods;
CFA® 2025 Level II Curriculum, Volume 3, Module 21.