What is the expected return on a stock with a guaranteed dividend of $3 if there is a 30-percent chance its price could rise by 50 percent, a 30-percent chance its price could fall by 50 percent, and a 40-percent chance its price could stay constant at the present price of $60 per share?

Question

Quizplus · Accepted Answer

The expected return on the stock is calculated by considering the guaranteed dividend of $3. The price fluctuations do not affect the dividend payment, so regardless of the stock price changes, the return from the dividend remains $3.

What Is the Expected Return on a Stock with a Guaranteed