The Phelps Company's common stock is currently trading for $25.50 per share. The stock is expected to pay a $2.80 dividend at th
1 answer:
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Answer:
6.78%
Explanation:
Data provided in the question:
Total return i.e nominal rate = 15% = 0.15
Real return = 7.7% = 0.077
Now,
Inflation rate = - 1
on substituting the respective values, we get
Inflation rate = - 1
or
Inflation rate = [ 1.15 ÷ 1.077 ] - 1
or
Inflation rate = 0.0678
or
Inflation rate = 0.0678 × 100% = 6.78%