Asked by Ryleigh Geddes on Jul 01, 2024
The common stock of BJ's Auto Clinic sells for $38.25 a share. The stock is expected to pay $1.90 per share next month when the annual dividend is distributed. BJ's has established a pattern of increasing their dividends by 2.5% annually and expects to continue doing so. What is the market rate of return on this stock?
A) 4.41%
B) 4.97%
C) 7.38%
D) 7.47%
E) 7.59%
Market Rate
The prevailing price or interest rate available in the marketplace for goods, services, or securities.
Annual Dividend
The total dividend payment a shareholder receives from a stock over the course of a year.
Dividends Increasing
A situation where a company's dividend payouts are rising over time, often indicating financial health and profitability.
- Ascertain the market's rate of return by examining the stock's existing yield and perpetual dividends.
Learning Objectives
- Ascertain the market's rate of return by examining the stock's existing yield and perpetual dividends.