Question

5-4. Wilma just sold all the shares of International Inns stock that she owned for $156 per share. She purchased the stock one year ago for $150 per share. If Wilma did not receive any dividend payments during the year, what yield did she earn on her investment?

Answer 1

Yeild on investment = (156-150)/150 = 4%

Total Dividend earned= (200*0.6)*3 = 360

Total return =( (current price - purchase price)+dividend)/ purchase price = ((26-28)+.6+(28-28)+.6+(32-28)+.6)/28 =13.57%

Return earn 1st year =(( 26-28)+.6)/28= -5%

Return 2nd year = ((28-28)+.6)/28 = 2.14%

Return 3rd year = ((32-28)+.6)/28 = 16.4%