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6 November, 18:59

Super Computer Company's stock is selling for $100 per share today. It is expected that-at the end of one year-it will pay a dividend of $6 per share and then be sold for $114 per share. Calculate the expected rate of return for the shareholders.

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  1. 6 November, 22:40
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    The expected rate of return for the shareholders is 20%

    Explanation:

    The expected return per share = dividend to be received + premium on stock = $6 + ($114 - $100) = $20

    So the expected rate on return for the shareholders = total expected return per share / price per share = $20/$100 = 20%
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