In the following year, the dividend was raised to $2.25. However, a bear market developed toward the end of the year, and the stock price declined from $56 at the beginning of the year to $48 at the end of the year. Compute the rate of return or (loss) to stockholders.
Answer to relevant QuestionsAssume the real rate of return in the economy is 2.5 percent, the expected rate of inflation is 5 percent, and the risk premium is 5.8 percent. Compute the risk-free rate (Formula 1-3) and required rate of return. Indicate the primary purpose of the Securities Act of 1933. Why was it enacted? Does the SEC certify that a security is fairly priced? Explain the difference between a cash account and a margin account. Why might one say that the Wilshire 5000 Equity Index is the most comprehensive market measure? Assume you buy 100 shares of stock at $40 per share on margin (40 percent). If the price rises to $55 per share, what is your percentage gain on the initial equity?
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