Question
ChangeCo.'s stock trades now for $20.40 a share and pays an annual dividend that is expected to increase by 2.00% annually. The company just paid
ChangeCo.'s stock trades now for $20.40 a share and pays an annual dividend that is expected to increase by 2.00% annually. The company just paid a dividend of $.80 a share. Due to a change in the company's risk profile, its expected rate of return changed and the price of the stock recently increased by 125.0% as a result. What is the percentage point change in the expected rate of return of the stock (hint: only the company's expected rate of return changed - everything else remained constant)?
a.) | The percentage point change in the expected rate of return is 9.00%. |
b.) | The percentage point change in the expected rate of return is -2.00%. |
c.) | The percentage point change in the expected rate of return is -3.92%. |
d.) | The percentage point change in the expected rate of return is -5.00%. |
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