Judy's Boutique just paid an annual dividend of $1.65 on its common stock.The firm increases its dividend by 2.5 percent annually.What is the rate of return on this stock if the current stock price is $38.20 a share?

Question

Quizplus · Accepted Answer

The correct answer is A.The rate of return on a stock is calculated by dividing the annual dividend by the current stock price. In this case, the annual dividend is $1.65 and the current stock price is $38.20. Therefore, the rate of return is $1.65/$38.20 = 0.0693, or 6.93%.

Judy's Boutique Just Paid an Annual Dividend of $1