Silicon Ltd. has a current stock price of $50.9 per share, is expected to pay an annual dividend of $3.1 in one year, and its expected price right after paying that dividend is $58.2. What is the expected capital gain rate for Silicon Ltd.? (State your answer in percentage terms and round to 2 decimal places, e.g. put 4.59 if your answer is 0.04586384)
Question
Silicon Ltd. has a current stock price of 3.1 in one year, and its expected price right after paying that dividend is $58.2. What is the expected capital gain rate for Silicon Ltd.? (State your answer in percentage terms and round to 2 decimal places, e.g. put 4.59 if your answer is 0.04586384)
Solution
The capital gain rate can be calculated using the formula:
Capital Gain Rate = (Expected Price - Current Price) / Current Price
Here, the Expected Price is 50.9.
So,
Capital Gain Rate = (50.9) / $50.9
Calculate the difference between the Expected Price and the Current Price:
50.9 = $7.3
Then, divide this difference by the Current Price:
50.9 = 0.14342
To convert this to a percentage, multiply by 100:
0.14342 * 100 = 14.342%
Rounding to two decimal places, the expected capital gain rate for Silicon Ltd. is 14.34%.
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