The stock of FM430.com is trading at $25 today. Exactly one year ago, the stock was trading at $32.50.

(b) Assume instead that the stock paid quarterly dividends of $1.25, $2.45, $0.25, $0.25. The first dividend payment was made exactly 9 months ago and the last dividend payment was today. Compute the stock's realized return assuming that dividends were reinvested in the stock when its (ex-dividend) price was $30.15, $26.25, $24 and $25 (price today), respectively

(c) The economy is sliding into a recession, and FM430.com announced that it would suspend its dividend payments for at least one year. Analysts have computed the price of FM430.com's stock one year from now under three possible scenarios:

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State Recession Unchanged Boom Price of FM423.com Probability $15 0.4 $29 0.4 $35 0.2 State Recession Unchanged Boom Price of FM423.com Probability $15 0.4 $29 0.4 $35 0.2

Answer rating: 100% (QA)

Answer To compute the stocks realized return we need to calculate the total value of the investment ... View the full answer