Indy owns 100 shares of stock in Pet Mart Corporation that he purchased for $20 per share.Every year he has received,from company profits,$1 for each share he owns. Refer to the information given.Indy should necessarily sell his stock if:

Question

Quizplus · Accepted Answer

Indy should sell his stock if he expects the sum of future capital gains and dividends to be negative. Even though he purchased the stock for $20 per share and is receiving dividends of $1 per share every year, he may still incur a loss if the expected future capital gains are negative. Therefore, option B is the most appropriate choice. Option A is not necessarily the best choice, as the stock price falling below the purchase price does not always result in a loss if the dividends received are high enough. Option C is not necessarily the best choice, as there may be other reasons why the company stopped paying dividends, such as reinvesting profits back into the company for future growth.

Indy Owns 100 Shares of Stock in Pet Mart Corporation