Use the Information for the Question(s)below

question 32

Multiple Choice

Use the information for the question(s) below.
Von Bora Corporation is expected to pay a dividend of $1.40 per share at the end of this year and a $1.50 per share at the end of the second year.You expect Von Bora's stock price to be $25.00 at the end of two years.Von Bora's equity cost of capital is 10%.
-Suppose you plan on purchasing Von Bora stock in one year,right after the $1.40 dividend is paid.You then plan on selling your stock at the end of year two,right after the $1.50 dividend is paid.The total return that you will receive on your investment is closest to:

• A)9.50%.
• B)10.75%.
• C)10.25%.
• D)10.00%.

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Definitions:

Investment's Risk

The potential for losing money or not achieving the expected return on an investment due to various factors like market volatility.

Distribution of Returns

The way in which the earnings from an investment are paid out or reinvested.

Portfolio's Value

The total worth of all the investments held in an individual's or entity's investment portfolio.

Weighted

Adjusted for importance or relevance, usually referring to averages or sums that give different elements varying degrees of significance.