Chris purchases $3,000 worth of stock that costs $30 per share and borrows money so his debt to equity ratio is 20%. The stock pays a dividend of $2.30 per share in one year. Chris is charged 7% to borrow money. What is his Return on Equity? Multiple Choice O 6.27% 7.80% 9.20%

Chris purchases $3,000 worth of stock that costs $30 per share and borrows money so his debt to equity ratio is 20%. The stock pays a dividend of $2.30 per share in one year. Chris is charged 7% to borrow money. What is his Return on Equity? Multiple Choice O 6.27% 7.80% 9.20%

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter5: The Cost Of Money (interest Rates)

Section: Chapter Questions

Problem 2PROB

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Concept explainers

Stock Yields

The stock yield is otherwise known as the dividend yield. The dividend yield is an annual payment of the stock dividends to the holder of a firm’s stock. The dividend yield is a financial ratio to measure the value of dividend payout every year for the relative stock price. The yield of a stock is usually shown in a percentage that discloses the expected future earnings from stock depending on the current stock price in the future. Stock yield will change depending on the market fluctuations and in accordance with the market fluctuations, the dividends will be increased or decreased by the firm.

Question

Chris purchases $3,000 worth of stock that costs $30 per share and borrows money so his debt to equity ratio is 20%. The stock
pays a dividend of $2.30 per share in one year. Chris is charged 7% to borrow money. What is his Return on Equity?
Multiple Choice
6.27%
7.80%
9.20%
6.50%

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