If the expected return on the stock is 6%, and no unexpected news concerning the stock surfaces, calculate the stock's total return.
A)2.95%
B)4.95%
C)6.55%
D)7.40%
E)8.85%

Question

Quizplus · Accepted Answer

The total return of a stock is the sum of its expected return and any unexpected return. Since no unexpected news concerning the stock surfaces, the unexpected return is 0%. Therefore, the stock's total return would be 6% + 0% = 6%. However, this is not one of the answer choices. To find the closest answer choice, we can use the formula:

Total return = expected return + unexpected return

We already know the expected return is 6%, so we need to determine the unexpected return. Since there is no unexpected news, the unexpected return is 0%. Therefore, the total return is:

Total return = 6% + 0% = 6%

The closest answer choice to 6% is B) 4.95%, which is the answer we choose.

If the Expected Return on the Stock Is 6%, and No