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Court has one share of stock and one bond. The total value of the two securities is 940 dollars. The bond has a YTM of 10.01 percent, a coupon rate of 6.88 percent, and a face value of 1,000 dollars. The bond matures in 14 years and pays annual coupons with the next one expected in 1 year. The stock is expected to pay an annual dividend every year forever, the next dividend is expected to be 11.39 dollars in 1 year, all subsequent dividends are expected to grow at the same annual growth rate, and the expected return for the stock is 12.78 percent. What is the annual growth rate of the stock’s dividend expected to be? Answer as a rate in decimal format so that 12.34% would be entered as .1234 and 0.98% would be entered as .0098.

Financial Management, Finance

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