Question

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23 A stock is selling today for $50 per share. At the end of the year, it pays a dividend of $2 per share and sells for $57. a. What is the total rate of return on the stock? (Enter your answer as a whole percent.) Rate of return 01:36:07 b. What are the dividend yield and percentage capital gain? (Enter your answers as a whole percent.) % Dividend yield Capital gains yield % Now suppose the year-end stock price after the dividend is paid is $43. What are the c. dividend yield and percentage capital gain in this case? (Negative amounts should be indicated by a minus sign. Enter your answers as a whole percent.) % Dividend yield Capital gains yield % d. Is there any change in the dividend yield calculated in parts (b) and (c)? ; it is based on the The dividend yield is (Click to select) (Click to select)

Answer 1

Solution :-

(a) Rate of Return = ( $57 + $2 - $50 ) / $50 = 18%

(b)

Dividend Yield = $2 / $50 = 4%

Capital Gain Yield = ( $57 - $50 ) / $50 = 14%

(c)

If the year end price = $43

Dividend Yield = $2 / $50 = 4%

Capital Gain Yield = ( $43 - $50 ) / $50 = - 14%

(d)

The Dividend Yield is not change as it is based on opening price

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