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Sweet treats pays a constant annual dividend of $2.38 a share and currently sells for $52.60 a share. what is the rate of return?

Respuesta :

Given:
Annual dividend  = $2.36 per share
Cost per share = $52.60

By definition, the rate of return is
r = (Vf - Vi)/Vi
where
Vi = initial investment
Vf = final value, including dividends.

Assume that the share price remains unchanged within the year. Then the final value is
Vf = 52.60 + 2.36 = $54.96
The initial investment is Vi = $52.60

The rate of return is
r = (54.96 - 52.60)/52.60
  = 0.04487
  = 4.5% approximately

Answer: The rate of return is approximately 4.5%

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