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aleksandrvk [35]
3 years ago
9

What rate of return is expected from a stock that sells for $30 per share, pays $1.54 annually in dividends, and is expected to

sell for $32.80 per share in one year
Business
1 answer:
Dmitriy789 [7]3 years ago
6 0

Answer:

The Rate of return expected from the stock is <u>14.47%</u>

Explanation:

Holding period return is the rate of return paid on the investment in the specific stocks in the form of dividend and appreciation in the value of the stock as well until the stock is held.

Firste we need to calculate the return on investment

Return on investment = Dividend Paid in the period + Appreciation in the value of stock

Placing values in the formula

Return on investment = $1.54 + ( $32.80 - $30 ) = $1.54 + $2.80 = $4.34

Now calculate the return rate as follow

Holding period return = ( Return on investment / Initial price of the stock ) x 100

Placing values in the formula

Holding period return = ( $4.34 / $30 ) x 100

Holding period return = <u>14.47%</u>

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