Question

On April 29, 2020, Patricia purchased 2,000 shares in an aggressive growth company called WootWoot! Inc....

On April 29, 2020, Patricia purchased 2,000 shares in an aggressive growth company called WootWoot! Inc. for $19.40/share. Patricia believes the stock price will increase to $29/share in one year; she also expects to receive dividends of $5,000 over this period on these shares. If Patricia is correct, what would be her return?

58.70%

58.92%

62.37%

66.70%

59.83%

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Answer #1

Option 3: 62.37% is the correct answer

Explanation: -

where,

R = Rate of return

Pt = stock price at the beginning of the period

t = time period

Pt-1 = stock price at the beginning of the period

Dt = cash dividend received over the period

here,

R = Rate of return

Pt = $29

t = 1

Pt-1 = $19.4

Dt = $5000 / number of shares

= $5000 / 2000

= $2.5 per share

By substituting the values, we get,

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