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The total rate of return on a stock can be positive even when the price of the stock depreciates...

Question:

The total rate of return on a stock can be positive even when the price of the stock depreciates because of the:

a. capital appreciation.

b. dividend yield.

c. interest yield.

d. super-normal growth.

e. real rate of return.

Return on a stock

Return on a stock is the combination of appreciation in the value of the stock and dividend received during the year from the stock. There are various factors on which these 2 depends

Answer and Explanation:

We will answer this using negation

a. capital appreciation

- No, If the stock price has gone down there is no capital appreciation

b. dividend yield.

- Yes, the decrease in the price of the stock can be compensated by the dividend

c. interest yield.

- No, there is no interest attached to the stocks

d. super-normal growth.

- No, super normal growth must have impacted the price and would not have let the price to go down

e. real rate of return.

- No, the real rate of return is the combination of dividend and appreciation in the value


Learn more about this topic:

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Cash Dividends & Dividend Payment

from Finance 101: Principles of Finance

Chapter 16 / Lesson 1
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