If d0 = $1.75, g (which is constant) = 3.6%, and p0 = $40.00, what is the stock's expected total return for the coming year?

a. 8.13%

b. 7.48%

c. 7.64%

d. 9.92%

e. 6.42%

Is known;

d0 = $ 1.75

p0 = $ 40.00

g = 3.6% = 0.036

Asked:

the expected total stock return for the coming year?

By using a formula;

Share price = (Dividend this year) (1 + g) ÷ (r - g)

By placing values;

40 = (1.75) (1 + 0.036) ÷ (r - 0.036)

r - 0.036 = (1.75) (1,036) ÷ 40

r - 0.036 = 1,813 ÷ 40

r - 0.036 = 0.045325

r = 0.045325 + 0.036

r = 0.081325 = 0.081325 x 100

r = 8.13%

So, the expected total stock return for the coming year is 8.13%.

The rate of return is the expected return obtained in the future, while the risk is defined as the uncertainty of the expected return.

Risk is the possibility of a deviation from the average of the expected rate of return that can be measured from the standard deviation using statistics.

To measure relative risk the coefficient of variation is used, which describes the risk per unit of return expected as indicated by the magnitude of the standard deviation divided by the expected level of return.

The relationship between risk and return is:

If you invest in speculative stocks (or any stock), you take risks in the hope of getting a large return.

The risk on an asset can be analyzed in two ways:

Learn more

definition of The rate of return

definition of Risk

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Grade: High School

Subject: Business

keywords: The rate of return

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