Problem 1: The price of the stock of Clarkson Corporation went from $50 to $56 last year. The firm also paid $2 in dividend. Compute the rate of return.
Problem 2: In the following year, the dividend was raised to $2.25. However, a bear market developed toward the end of the year, and the stock price declined from $56 at the beginning of the year to $48 at the end of the year. Compute the rate of return or (lose) to stockholders.
Problem 3: Assume you buy 100 shares of stock at $40 per share on margin (50 percent). If the price rises to $55 per share, what is your percentage gain on the initial equity? (margin purchase)
Problem 4: In problem 3, what would the percentage loss on the initial equity be if the price had decreased to $28? (margin purchase)