Suppose a company has a unique dividend policy. the firm has expects to pay a dividend of $3.45 in the next year. they anticipate decreasing the dividend 3% per year, indefinitely. if the current stock price is $17.50, what is the required rate of return by shareholders?
a. 16.71%
b. 21.66%
c. 16.12%
d. 22.71%
e. 20.31%

A. 16.71%

Explanation:

Use dividend discount model (DDM) to solve this question.

Formula for finding the required return of a stock is;

r =

where P0 = Current price = $17.50

D1 = Next year's dividend = $3.45

r= required return = ?

g= growth rate = -3% or -0.03 as a decimal (negative sign is because dividend is expected to decrease)

r =

As a percentage , it becomes 16.71%

(a) when insurance is obtained through a reciprocal insurer, the insureds are sharing the risk of loss with other subscribers of that reciprocal.

i really hope this answer you out! it makes my day people like you and giving back to the community that has me through school! if you could do me a favor, if this you and this is the very best answer and you understand that all of my answers are legit and top notch. mark as brainliest! and have a awesome day!