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One-Period Valuation Model

V0 = (D1 + P1) /(1 + Ke)

Be sure to use expected dividend D1 in calculation.

Question :

Analyst expects a stock selling for $25 per share to increase to $30 by year end. The last dividend was $1, but the analyst expects next year's dividend to be $1.50. What is the expected holding period yield on this stock?


Yield =($31.50/$25)-1= 26%

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