The Expected Return on a Common Stock Is Equal To

question 68

Multiple Choice

The expected return on a common stock is equal to:

• A) [(1 + dividend yield) × (1 + capital appreciation rate)] − 1.
• B) the capital appreciation rate + dividend yield.
• C) (1 + capital appreciation rate)/(1 + dividend yield).
• D) the capital appreciation rate − dividend yield.

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Definitions:

Tax

Tax refers to a compulsory financial charge or some other type of levy imposed upon a taxpayer by a government organization in order to fund government spending and various public expenditures.

Good

An item or product that satisfies a want or need and can be transferred to others.

Consumer Surplus

The difference between what consumers are willing to pay for a good or service and what they actually pay, representing their gain from the transaction.

Market Equilibrium

A market state where the quantity demanded equals the quantity supplied, leading to no pressure on the price to either rise or fall.