Question

Suppose you bought 500 shares of stock at an initial price of $44 per share. The stock paid a dividend of $.42 per share during the following year, and the share price at the end of the year was $45.

a.	What is the capital gains yield? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)

Capital gains yield

%

b.	What is the dividend yield? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)

Dividend yield

%

c.	What is the total rate of return on the investment? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the"%"sign in your response.)

Total rate of return

%

Answer 1

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Paticulars

a)

Capital Gain Yield = (P1-P0)/P0

Capital Gain Yield = (45 - 44)/44

Capital Gain Yield = 2.27%

b)

Dividend Yield = Most recent dividend/Current Share Price

Dividend Yield = .42/45

Dividend Yield = .93%

c)

Rate of return = (1 + .42)/44 = 3.23%