Last year, you purchased 680 shares of Forever, Inc., stock at a price of $49.18 per...

Last year, you purchased 680 shares of Forever, Inc., stock at a price of $49.18 per share. You received $1,020 in dividends and a total of $39,814 when you sold the stock. What was the capital gains yield on this stock?

Expert Solution

Last year, you purchased 680 shares of Forever, Inc., stock at a price of $49.18 per share. You received $1,020 in dividends and a total of $39,814 when you sold the stock. What was the capital gains yield on this stock?

The formula for Capital gain yield = ( P1 - P0 ) / P0

Here,

P1 = selling proceeds total = $ 39814

P0 = Past stock price ( when the time of purchased ) * number of share

Past stock price = $ 49.18

Number of share = 680

P0 = 49.18 * 680 = 33442.40

Capital gain yield = ( 39814 - 33442.40 ) / 33442.40

Capital gain yield = 6371.60 / 33442.40 = 0.1905 = 19.05%

Capital gains yield on this stock = 19.05%

**Capital gains yield is the percentage price appreciation on an investment. It is calculated as the increase in the price of an investment, divided by its original purchased cost.

**In the question also provide the dividend, doesn’t consider dividend in capital gain yield calculation.

jeff jeffy answered 2 years ago

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