Question

Common stockholders expect to earn a return by receiving

a) semiannual interest.
b) fixed periodic dividends.
c) dividends.
d) annual interest.

Answer 1

Common stockholders expect to earn a return by receiving dividends or through capital gains. Therefore, the correct option is C.

Step-by-step explanation:

Common stockholders expect to earn a return by receiving dividends. When a firm decides to issue stock, investors expect to receive a rate of return. This return can come in the form of direct payments to shareholders called dividends. Alternatively, investors can earn a return by selling their shares at a higher price, which is known as a capital gain.