Question

for what price would you need to sell your stock in one year in order to earn your required rate of return

Answer 1

Answer: a. $58

Step-by-step explanation:

Your required return in dollars is;

= 16% * 52

= $8.32

Return = Dividend + Capital appreciation.

8.32 = 2.40 + Capital appreciation

Capital appreciation = 8.32 - 2.40

= $5.92

The stock would have to increase by $5.92 to get your required return;

= 52 + 5.92

= $57.92

= $58