ZuoTi.Pro
Question

Explain in a a paragraph. What is the relationship among Expected rate of return, Expected dividend...

Explain in a a paragraph.

What is the relationship among Expected rate of return, Expected dividend yield and the Expected growth rate (or the capital gains yield)?

business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Expected rate of return is the sum of of expected dividend yield and capital gains yield. An investor would expect two types of Returns from the investment. This will be in the form of dividend on shares in which he has invested. He will also expect an increase in the the share price which will give him return in the form of capital gains. Dividend yield represents the amount of dividend received on the initial investment. Capital gains yield refers to the increase in the the total amount of the investment. The sum of these is the expected rate of return on the investment.

0 0
Add a comment
Know the answer?
Add Answer to:
Explain in a a paragraph. What is the relationship among Expected rate of return, Expected dividend...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • Which of the following statements is CORRECT, assuming constant growth? a. Expected rate of return is...

    Which of the following statements is CORRECT, assuming constant growth? a. Expected rate of return is equal to expected dividend yield. Expected rate of return is equal to expected dividend yield plus expected capital gains yield. Expected rate of return is equal to expected dividend yield plus expected capital gains yield minus the growth rate. d. None of the above.

  • What is the capital gains yield of a constant growth stock with an expected growth rate...

    What is the capital gains yield of a constant growth stock with an expected growth rate of 0.03. The stock just paid a dividend of $5.13 and according to the Capital Asset Pricing Model the stock should return 0.03?

  • Ch 09: Assignment. Stocks and Their Valuation 6. Expected returns, dividends, and growth The constant growth...

    Ch 09: Assignment. Stocks and Their Valuation 6. Expected returns, dividends, and growth The constant growth valuation formula has dividends in the numerator. Dividends are divided by the difference between the required return and dividend growth rate as follows: PD - Which of the following statements best describes how a change in a firm's stock price would affect a stock's capital gains yield? The capital gains yield on a stock that the investor already owns has an inverse relationship with...

  • Nonconstant Dividend Growth Valuation Conroy Consulting Corporation (CCC) has a current dividend of D0 = $2.20....

    Nonconstant Dividend Growth Valuation Conroy Consulting Corporation (CCC) has a current dividend of D0 = $2.20. Shareholders require a 9% rate of return. Although the dividend has been growing at a rate of 28% per year in recent years, this growth rate is expected to last only for another 2 years (g0,1 = g1,2 = 28%). After Year 2, the growth rate will stabilize at gL = 6%. What is CCC's stock worth today? Do not round intermediate calculations. Round...

  • 14. What is the expected price of a stock which pays a $1 dividend next year,...

    14. What is the expected price of a stock which pays a $1 dividend next year, has a required return of 5% and a dividend growth of 1%? What is the expected total return of the stock? What is the dividend yield of the stock? What is the capital gains return of the stock?

  • Consider four different shares, all of which have a required return of 16% and a most...

    Consider four different shares, all of which have a required return of 16% and a most recent dividend of $2.80 per share. Shares W, X and Y are expected to maintain constant growth rates in dividends for the foreseeable future of 8%, 0% and −5% per year, respectively. Share Z is a growth stock that will increase its dividend by 20% for the next two years and then maintain a constant 12% growth rate thereafter. What is the dividend yield...

  • Riggs Inc. has seen non-constant dividend growth in recent years. Dividends are expected to grow at...

    Riggs Inc. has seen non-constant dividend growth in recent years. Dividends are expected to grow at rates of 20%, 15% and 10% for the next three years respectively. After that, dividend is expected to remain constant at a rate of 5%. Riggins Riggs has a required rate of return of 10%. a. If the last paid dividend, D0, was $2.50, what would Riggins Riggs stock be worth today? b. What would the capital gains and dividend yield equal in the...

  • . Expected returns, dividends, and growth The constant growth valuation formula has dividends in the numerator....

    . Expected returns, dividends, and growth The constant growth valuation formula has dividends in the numerator. Dividends are divided by the difference between the required return and dividend growth rate as follows: Pˆ0P̂0 =  = D1(rs – g)D1(rs – g) Which of the following statements best describes how a change in a firm’s stock price would affect a stock’s capital gains yield? The capital gains yield on a stock that the investor already owns has an inverse relationship with the firm’s...

  • 6. Expected returns, dividends, and growth The constant growth valuation formula has dividends in the numerator....

    6. Expected returns, dividends, and growth The constant growth valuation formula has dividends in the numerator. Dividends are divided by the difference between the required return and dividend growth rate as follows Pr 9) Which of the following statements best describes how a change in a firm's stock price would affect a stock's capital gains yield? O The capital gains yield on a stock that the investor already owns has a direct relationship with the firm's expected future stock price....

  • Shell is experiencing rapid growth. Earnings and dividends are expected to grow at a rate of...

    Shell is experiencing rapid growth. Earnings and dividends are expected to grow at a rate of 15% during the next 2 years, at 13% the following year, and at a constant rate of 6% during Year 4 and thereafter. Its last dividend was $1.15, and its required rate of return is 12%. f) Calculate the dividend and capital gains yields for Years 1, 2, and 3. Dividend Yield Year 1 =  % Capital Gains Yield Year 1 =  % Dividend Yield Year...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT