Suppose a stock had an initial price of $85 per share, paid a dividend of $1.50...

Suppose a stock had an initial price of $85 per share, paid a dividend of $1.50 per share during the year, and had an ending share price of $99.

Compute the percentage total return. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Percentage total return             %

What was the dividend yield? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Dividend yield             %

What was the capital gains yield?

Expert Solution

Solution:

Initial stock price = $85 (per share)

Dividend paid = $1.5 (per share)

Share ending price = $99 (per share)

Stock rise = $99-85 =$14

Profit earned = stock rise + dividend yield = 14+1.5 =$15.5

(i) Percentage total return % = Total profit earned / Amount invested

= 15.5 / 85
= 18.24%

(ii) Dividend yield % = Dividend earned / Stock price

= 1.5 / 85

= 1.76%

(iii) Capital gains yield % = Stock rise / Initial stock price

= 14 / 85

= 16.47%

jeff jeffy answered 2 years ago

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