Chapter 12 Financial Planning Exercise 2 Calculating expected return on an investment

An investor is thinking about buying some shares of Health Diagnostics, Inc., at $60 a share. She expects the price of the stock to rise to $90 a share over the next 3 years. During that time, she also expects to receive annual dividends of $3 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.) Round the answer to two decimal places.

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