Question

Problem 12-3 Return Calculations [LO1]

Suppose a stock had an initial price of $50 per share, paid a dividend of $.80 per share during the year, and had an ending share price of $38.

Compute the percentage total return, dividend yield, and capital gains yield. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

	Total return % Dividend yield % Capital gains yield %

Answer 1

	Po =	Purchase Price
	P1 =	Sale Price
A)	Total Return on Shares =	Dividend Income + (P1 - P0)
		0.80 + (38 -50)
		-11.20
	Return on Shares in % =	Return on Share / P0 * 100
		-11.20 / 50 * 100
		-22.40%
B)	DIVIDEND YIELD =	Dividend Income/ P0 * 100
		0.80 / 50 * 100
		1.60%
C)	CAPITAL GAIN YIELD =	(P1 - P0)/ P0 * 100
		(38 - 50) / 50 * 100
		-24.00%