Almas Mohammed Paid $50 for a Stock of Jones Inc

question 3

Short Answer

Almas Mohammed paid $50 for a stock of Jones Inc. and expects to earn an annual dividend of $5. If the price of the stock increases to $55 in a year's time, compute the real rates of return from this investment if:
A) the expected inflation rate a year from now is 1.25%.
B) the expected inflation rate a year from now is 3%.

• A) the expected inflation rate a year from now is 1.25%.
• B) the expected inflation rate a year from now is 3%.

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