Problem 1 You bought a share of stock for $100. It is now worth $107 and...

Problem 1

You bought a share of stock for $100. It is now worth $107 and has just paid an annual dividend of $4 per share.

Part 1

What was the dividend yield?

Part 2

What was the capital gains yield?

Part 3

What was the total rate of return?

Solutions

Expert Solution

Dividend yield = Annual dividend per share / Market price per share = 4/107 = 0.0374

Capital Gains Yield = [(Current price - Original Price)/Original Price] * 100

= 107- 100/100 = 0.07 = 7%

Total rate of Return = (Current price + dividend - original price) / original price

= (107 + 4 - 100)/100 = 0.11 = 11%

jeff jeffy answered 2 years ago

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