The rate of return after one year if steel stock dividend is $64200. at (I) $50.
A dividend is when a company distributes profits to its shareholders. When a company makes a profit or surplus, it may pay a portion of the profit to its shareholders as dividends. Amounts not distributed will be reinvested in the company. Dividends are usually paid to shareholders quarterly, but some companies pay dividends semi-annually. Payments can be received as cash or reinvested in company stock.
Equity = Assets - Liabilities
= [margin account or invested cash + proceed from sale of short shares] - Value of 800 shares owned
= [$25000 + (800 * $50)] - 800 *Price
= [$25000 + $40000] - 800 *Price
= $65000 - 800 *Price
= $64200
Dividends indicate that a company has stable cash flows and is profitable. It can also provide recurring income to investors. Dividend payments also help provide insight into a company's intrinsic value. Many countries also offer preferential tax treatment for dividends if they are treated as non-taxable income.
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