Question

Which of the following is another name for the required return on a stock?
a)Dividend payout ratio.
b)Retention ratio
c)Discount rate
d)Value

Answer 1

Another name for the required return on a stock is the “Discount rate”, as it is the minimum return that an investor who invest in a company’s stock. The minimum return is the also a nature of compensation for the risk associated with the company’s stock by holding the stock.

Option c “Discount rate” is the correct option.

Option a “Dividend Payout ratio” is incorrect option as not only the dividend is required in return oh holding the stock, the increment on value of stock is also required.

Option b “Retention ratio” is incorrect option as it is only the ratio of how much company retained profits, which is not required rate of return.

Option d “Value” is incorrect option as Value of stock is the price of a stock and is not the required return on stock.

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