In: Finance
Suppose a stock had an initial price of $82 per share, paid a
dividend of $1.20 per share during the year, and had an ending
share price of $74.
Compute the total percentage return. (Do not round
intermediate calculations. A negative answer should be indicated by
a minus sign. Enter your answer as a percent rounded to 2 decimal
places, e.g., 32.16.)
Total return
%
What was the dividend yield and the capital gains yield?
(Do not round intermediate calculations. A negative answer
should be indicated by a minus sign. Enter your answers as a
percent rounded to 2 decimal places, e.g.,
32.16.)
Dividend yield | % |
Capital gains yield | % |
Solution :
A : The total percentage return on a given stock is calculated using the following formula :
Total percentage Return = [ ( Ending Price – Initial Price + Dividend Income ) / Initial Price ]
As per the Information given in the question we have
Ending Price = $ 74 per share
Initial Price = $ 82 per share
Dividend Income = $ 1.20 per share
Applying the above values in the formula we have
= ( 74 - 82 + 1.20 ) / 82
= - 6.8 / 82 = - 0.0829
= - 8.29 % ( when rounded off to two decimal places )
Thus total percentage return = - 8.29 %
B. The dividend yield on a stock is calculated using the following formula :
Dividend Yield = Annual Dividend / Ending price of stock
As per the Information given in the question we have
Ending Price = $ 74 per share
Dividend Income = $ 1.20 per share
Applying the above values in the formula we have
= $ 1.20 / 74 = 0.0162
= 1.62 % ( when rounded off to two decimal places )
Thus the Dividend Yield = 1.62 %
C. The Capital gains yield on a stock is calculated using the following formula
Capital gains Yield = ( Ending Price – Initial Price ) / Initial Price
As per the Information given in the question we have
Ending Price = $ 74 per share
Initial Price = $ 82 per share
Applying the above values in the formula we have
= ( 74 - 82 ) / 82
= - 8 / 82 = - 0.0976
= - 9.76 % ( when rounded off to two decimal places )
Thus Capital gains yield = - 9.76 %