53% (3.53% inflation + 2% GDP growth).
V = 0.010 * (1.055) / (.1280-.0553)
V = $145
Rate of return
Rate of return = [Dt + (Pt - Pt-1) / Pt-1], where'd denotes dividends while P. is for the stock price. The value (Pt - Pt-1) is denotes the capital gain on the stock.
If we consider the performance of Cathay from 12/01/2008 up to 12/01/2011 with the Starting price/share of $16.16 and Ending price/share of $13.60, We find that
The rate of Return is = 0.105 +(13.60-16.6)/16.6
= -47.33
Conclusion
It is not worth buying the common stock as a result of the relative low rate of return. Cathay Bank's strong market position among the Japanese and Japanese-American population positions should be used to its advantage in expanding its business portfolio so that it may become profitable. A review...
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