Question

If a stock is purchased for $25 per share and held one year, during which time a $1.75 dividend is paid and the price climbs to $29.5, the nominal rate of return is:

A. 13.00%.
B. 14.00%.
C. 20.00%.
D. 25.00%.

Answer 1

Answer:

Nominal rate of return

= Future price - Current price + Dividend paid   x  100

                          Current price

= $29.50 - $25.00 + $1.75     x 100

                $25

= $6.25  x 100

  $25

= 25%

Explanation:

The nominal rate of return equals future price minus current price plus dividend paid divided by current market price multiplied by 100.