The Busby Corporation had a share price at the start of the year of $26.20,paid a dividend of $0.56 at the end of the year,and had a share price of $29.00 at the end of the year.Which of the following is closest to the rate of return of investments in companies with equal risk to The Busby Corporation for this period?

Question

Quizplus · Accepted Answer

The rate of return can be calculated by taking the total gain (or loss) on an investment and dividing it by the original cost of the investment. In this case, the total gain includes both the increase in share price and the dividend paid. The increase in share price is $29.00 - $26.20 = $2.80. Adding the dividend of $0.56 gives a total gain of $2.80 + $0.56 = $3.36. The original cost of the investment is the starting share price, which is $26.20. Therefore, the rate of return is ($3.36 / $26.20) * 100 = 12.82%, which is closest to 13%.

The Busby Corporation Had a Share Price at the Start