Which of the following statements is correct about a stock currently selling for $50 per share that has a 16 percent expected return and a 10 percent expected capital appreciation?
A)Its expected dividend exceeds the actual dividend
B)Its expected return will exceed the actual return
C)It is expected to pay $3 in annual dividends
D)It is expected to pay $8 in annual dividends Expected return = expected dividend yield + expected capital appreciation
16% = expected dividend yield + 10%
6% = expected dividend yield

Question

Quizplus · Accepted Answer

Based on the given information, we can calculate the expected dividend yield as 6%. To calculate the expected dividend, we can multiply the current stock price by the expected dividend yield:

Expected dividend = $50 x 6% = $3

Therefore, choice C - "It is expected to pay $3 in annual dividends" is the correct statement.

Which of the Following Statements Is Correct About a Stock