Question

If D₁ = $1.50, g (which is constant) = 6.5%, and P₀ = $56, what is the stock's expected capital gains yield for the coming year?

Answer

	A.	6.50%
	B.	6.83%
	C.	7.17%
	D.	7.52%
	E.	7.90%

Answer 1

Expected rate of return = 1.50 / 56 + 6.5%, or 2.7% + 6.5% = 9.2%

Rate of 9.2% includes Current Yield of 2.7% and Capital Gain of 6.5%

a is an answer