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Blaxo Balloons manufactures and distributes birthday balloons. At the beginning of the year​ Blaxo's common stock was selling for ​$20.58 but by year end it was only ​$17.81. If the firm paid a total cash dividend of $ 2.93 during the​ year, what rate of return would you have earned if you had purchased the stock exactly one year​ ago? What would your rate of return have been if the firm had paid no cash​ dividend?

1 Answer

4 votes

Answer:

1st question 0.78%

2nd question -13.46%

Step-by-step explanation:

Rate of return = ((Year-end price - Beginning of year price) + Cash dividend) / Beginning of year price

Rate of return would you have earned if you had purchased the stock exactly one year​ ago = ((17.81 -20.58) + 2.93) / 20.58

= 0.78%

Rate of return have been if the firm had paid no cash​ dividend = ((17.81 -20.58) +0) / 20.58 = -13.46%

Hence answers are:

The rate of return you would have earned is 0.78%

The rate of return you would have earned if the firm paid no cash dividend is -13.46%

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