Question

The common stock of Olmsted Repair sells for $47.92 a share. The stock is expected to pay $2.28 per share next year when the annual dividend is distributed. The company increases its dividends by 1.65 percent annually. What is the market rate of return on this stock

Answer 1

64%

Step-by-step explanation:

The common stock for Olmsted repair is sold at $47.92

The stock is expected to make a payment of $2.28 when the next annual dividend is distributed

The company increases its dividend by 1.65%

= 1.65/100

= 0.0165

Therefore, the market rate of return on the stock can be calculated as follows

= div/Po + g

= 2.28/47.92 + 0.0165

= 0.0475+ 0.0165

= 0.064

= 64%

Hence the market rate of return on the stock is 64%