Assume That a Stock Is Priced at $50 and Pays

question 20

Multiple Choice

Assume that a stock is priced at $50 and pays an annual dividend of $2 per share. An investor purchases the stock on margin, paying $25 per share and borrowing the remainder from the brokerage firm at 9 percent annual interest. If, after one year, the stock is sold at a price of $65.25 per share, the return on the stock is

• A)60 percent.
• B)44 percent.
• C)30 percent.
• D)69 percent.

---

Definitions:

Trend Percentages

Analysis method used in financial and operational analysis to observe the direction and pace of changes in related data points over time.

Year 1

The first year in a given time series, often used as a reference point for financial analysis or reporting.

Year 2

The second year in a sequence of years, often used in financial documentation to denote the second operational or fiscal year.

Total Asset Turnover

A metric that evaluates how effectively a firm uses its assets to produce sales income.