The year-end price and dividend information on a stock is given in the following table. Year................. Price...........

Question:

The year-end price and dividend information on a stock is given in the following table.

Year................. Price........... Dividend

1 ...................$23.50.................. na

2..................... 24.80.............. $0.18

3..................... 22.90............... 0.12

a. What is the nominal return of the stock in years 2 and 3?

b. What is the corresponding real return if the inflation rates for years 2 and 3 were 2.8% and 1.6%, respectively?

Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...