PFIN 7:STUDENT EDITION-TEXT
PFIN 7:STUDENT EDITION-TEXT
7th Edition
ISBN: 9780357033616
Author: Billingsley
Publisher: CENGAGE L
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Chapter 12, Problem 2FPE

An investor is thinking about buying some shares of Health Diagnostics, Inc., at $75 a share. She expects the price of the stock to rise to $115 a share over the next three years. During that time, she also expects to receive annual dividends of $4 per share. Assuming that the investor’s expectations (about the future price of the stock and the dividends that it pays) hold up, what rate of return can the investor expect to earn on this investment? (Hint: Use either the approximate yield formula or a financial calculator to solve this problem.)

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