Assume a Stock Is Initially Priced at $50, and Pays

question 14

Multiple Choice

Assume a stock is initially priced at $50, and pays an annual $2 dividend. An investor uses cash to pay $25 a share and borrows the remaining funds at a 12 percent annual interest. What is the return if the investor sells the stock for $55 at the end of one year?

• A)50 percent
• B)30 percent
• C)10 percent
• D)16 percent
• E)8 percent

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