Which of the following statements is correct about a stock currently selling for per share that has a 16% expected return and a 10% expected capital appreciation?
OPTIONS ARE:
A) Its expected dividend exceeds the actual dividend.
B) Its expected return will exceed the actual return.
C) It is expected to pay in annual dividends.
D) It is expected to pay in annual dividends.
no wait were doing your homework now?
C) It is expected to pay $3 in annual dividends.
If it has an expected 16% return then that would imply your $50 should appreciate to $58. 10% Capital Appreciation means the actual stock rises 10% to $55. The other $3 to get to the $58 you need to achieve a 16% return would have to come from dividends.