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Super Computer Company's stock is selling for $100 per share today. It is expected that—at the end of one year—it will pay a dividend of $6 per share and then be sold for $114 per share. Calculate the expected rate of return for the shareholders.

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Answer:

The expected rate of return for the shareholders is 20%

Explanation:

The expected return per share = dividend to be received + premium on stock = $6 + ($114 - $100) = $20

So the expected rate on return for the shareholders = total expected return per share/ price per share  = $20/$100 = 20%