The Price of a Stock at the Beginning of a Year

question 109

Multiple Choice

The price of a stock at the beginning of a year is $50.There is a 70 percent chance of its price rising to $55 by the end of the year and a 30 percent chance of its price falling to $45.The stock will pay an amount of $2 at the end of the year.The current yield of the security is

• A)​4 percent
• B)​5 percent
• C)​70 percent
• D)​30 percent

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Definitions:

Index Fund

A type of mutual fund or exchange-traded fund designed to follow or track the components of a financial market index, such as the S&P 500.

Low P/E Ratios

Indicators that a company's stock is potentially undervalued, calculated by dividing the current market price by the earnings per share.

High P/E

A stock with a high price-to-earnings ratio, often indicating expectations of future growth or overvaluation.

Dividend Yields

An economic indicator demonstrating the yearly dividend distribution of a firm in comparison to its share price.