You invest in a stock costing $60. It pays a cash dividend during the year of...
You invest in a stock costing $60. It pays a cash dividend during the year of $3 and you expect its price to be $70 by the end of the year.
A. what is your expected rate of return?
B. if the stock is actually $50 at the end of the year, what is your realized rate of return?
Homework Answers
A. Expected Return = (Final Price - Buy Price + Dividend)/Buy Price
Expected return = ($70 - $60 + $3)/$60
Expected Return = 21.67%
B. Expected Return = (Final Price - Buy Price + Dividend)/Buy Price
Expected return = ($50 - $60 + $3)/$60
Expected Return = -11.67%
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