To Calculate the Return on a Stock That Pays a Year-End

question 8

Multiple Choice

To calculate the return on a stock that pays a year-end dividend, an investor should:

• A) divide the stock's sale price by its purchase price and subtract 1.
• B) add the dividend and sale price, divide by the purchase price and subtract 1.
• C) divide the sale price by the purchase price and add the dividend yield.
• D) divide all cash flows received by the selling price and subtract 1.

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Definitions:

Quantity

The amount or number of a material or immaterial entity that is considered separately.

Subsidy

A financial contribution granted by a government or organization to support a business, industry, or activity, making it more affordable or viable.

Market Equilibrium

A state in the market where the quantity demanded by consumers equals the quantity supplied by producers, leading to a stable price for a good or service.

Socially Optimal Level

A state in which resources are allocated in the most efficient way possible, maximizing societal welfare or benefit.