The Required Return on a Stock Is Equal to Which

question 23

Multiple Choice

The required return on a stock is equal to which one of the following if the dividend on the stock decreases by a constant percent per year?

• A) (P0/D1) - g
• B) (D1/P0)/g
• C) Dividend yield + Capital gains yield
• D) Dividend yield - Capital gains yield
• E) Dividend yield × Capital gains yield

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Definitions:

Average Variable Cost

The total variable costs (costs that change with production volume) divided by the quantity of output produced.

Diminishing Marginal Returns

A principle in economics where each additional unit of input results in a smaller increase in output than the previous unit, at a certain point.

Marginal Cost

The additional cost incurred in producing one more unit of a product, emphasizing the concept of optimizing production levels.

Average Total Cost

The total cost per unit of output, calculated by dividing the total cost of production by the total quantity produced.