Question 452 limited liability, expected and historical returns
What is the lowest and highest expected share price and expected return from owning shares in a company over a finite period of time?
Let the current share price be p0, the expected future share price be p1, the expected future dividend be d1 and the expected return be r. Define the expected return as:
r=p1−p0+d1p0
The answer choices are stated using inequalities. As an example, the first answer choice "(a) 0≤p<∞ and 0≤r<1", states that the share price must be larger than or equal to zero and less than positive infinity, and that the return must be larger than or equal to zero and less than one.