An issue of common stock is expected to pay a dividend of $3 at the end of the year. Its growth rate is equal to 3%, and the current share price is $40. What is the required rate of return on the stock?

a. Between 7% and 10% b. Between 10% and 12% c. Between 12% and 14% d. Between 14% and 17%

Please explain answer in detail and show what formula is used to solve. Thank you.