Super Computer Company's stock is selling for $100 per share today. It is expected that-at the end of one year-it will pay a dividend of $6 per share and then be sold for $114 per share. Calculate the expected rate of return for the shareholders.
A)20 percent
B)15 percent
C)10 percent
D)25 percent

Question

Quizplus · Accepted Answer

The expected rate of return is calculated as (Dividend + Price Increase) / Initial Price. Here, it is ($6 + $14) / $100 = 20%.

Super Computer Company's Stock Is Selling for $100 Per Share