Is known;
d0 = $ 1.75
p0 = $ 40.00
g = 3.6% = 0.036
Asked:
the expected total stock return for the coming year?
Answer:
By using a formula;
Share price = (Dividend this year) (1 + g) ÷ (r - g)
By placing values;
40 = (1.75) (1 + 0.036) ÷ (r - 0.036)
r - 0.036 = (1.75) (1,036) ÷ 40
r - 0.036 = 1,813 ÷ 40
r - 0.036 = 0.045325
r = 0.045325 + 0.036
r = 0.081325 = 0.081325 x 100
r = 8.13%
So, the expected total stock return for the coming year is 8.13%.
<h2>Further Explanation
</h2>
The rate of return is the expected return obtained in the future, while the risk is defined as the uncertainty of the expected return.
Risk is the possibility of a deviation from the average of the expected rate of return that can be measured from the standard deviation using statistics.
To measure relative risk the coefficient of variation is used, which describes the risk per unit of return expected as indicated by the magnitude of the standard deviation divided by the expected level of return.
The relationship between risk and return is:
- linear or unidirectional.
- The higher the rate of return, the higher the risk.
- The greater the assets that we place in investment decisions, the greater the risks that arise from these investments.
- Linear conditions are only possible in normal markets.
If you invest in speculative stocks (or any stock), you take risks in the hope of getting a large return.
The risk on an asset can be analyzed in two ways:
- Stand-alone, where the assets are considered separately.
- Based on the number of portfolios, where the asset is considered as one of several assets in the portfolio.
Learn more
definition of The rate of return brainly.com/question/12465558
definition of Risk brainly.com/question/12465558
Details
Grade: High School
Subject: Business
keywords: The rate of return
