Question

cocks and Other Assets ded Assignment Pead Chapter 71 Due Sunday 06.30.19 at 11:45 PM Back to Assignment Average: /9 Attempts 1. Stock returns and prices As Aa Suppose that Julian owns stock in Kitsch Electric (KE) that pays a quarterly dividend of $0.40 per share. On January 1, 2015, KE's price was $70.00 per share, but by April 1, 2015, its price rose to $80.00 and then ended the year at $75.00 per share, Fill In the cells in the following table by calculating the dividend yield and the capital-galns yleld for the first quarter of 2015 and the whole year: Dividend Yield (%) Capital-Gains Yield (%) First-quarter 0.60 Annual Julian also must pay taxes: O If he sells his shares with profit O Only under unfavorable tax treatment of implicit capital gains O Only on implicit capital gains At the end of the year, Julian has to pay taxes on his capital gains. Assume that the tax rate is 20% and the inflation rate is 5% Then Julian calculates his after-tax real return in the folowing way: (Hint: Do not forget to enter the minus sign if the value of the after-tax aeal retun is negative.) After-Tax Real Return (%) anese ht s ef use Copyiright Notices rtcy otice Security tte Accesstti 136 PM 6/27/2019

Answer 1

Dividend yield quarterly = Dividend / price = 0.40 / 70 = 0.6%

Dividend yield annual = (0.40*4) / 70 = 2.3%

Capital gain yield quarterly = (80 - 70) / 70 = 14.3%

Capital gain yield annual = (75-70) / 70 = 7.1%