Ashbury Inc.is expected to pay an annual dividend of $1.50 per share in the coming year,and to trade for $36.25 at the end of the year.If investments with the same risk as Ashbury's stock have an expected return of 8.75%,what is Ashbury's capital gain rate?

Question

Quizplus · Accepted Answer

The capital gain rate formula can be rearranged as follows:

Capital gain rate = (Ending stock price - Beginning stock price + Dividends received) / Beginning stock price

Substituting the given values:

Capital gain rate = (36.25 - 36.25 + 1.5) / 36.25
Capital gain rate = 0.041
Capital gain rate = 4.1%

Therefore, the answer is (B) 4.1%.