Question

IGM Realty had stock prices of $33, $33, $38, $36, and $28 at the end of the last five quarters respectively. If IGM pays a dividend of $1.1 at the end of each quarter, what is the annual realized return on IGM?

Quarter	Price	Dividend
0	$33	$1.1
1	$33	$1.1
2	$38	$1.1
3	$36	$1.1
4	$28	$1.1

Answer 1

Calculation of annualized realized return on the investment
Since, we are required to calculate annualized return, the relevant quarters are 1,2,3 and 4
The dividends are received at the end of every quarter - hence add dividends of quarter 1,2,3 and 4
The relevance of quarter 0 is to know the starting stock price, to calculate capital appreciation. The dividend is irrelevant, since it belongs to the previous year
(remember, stock price at the end of quarter 0 and stock price at the beginning of year 1 is $33)
To calculate the capital appreciation, subtract the opening price of the year from the closing price
	$
Opening price	33	(price at the end of quarter 0)
Closing price	28
Capital Appreciation	-5	(28-33)
Dividend receieved
Quarter	$
1	1.1
2	1.1
3	1.1
4	1.1
Total Dividends	4.4
Annualized return
= (Capital appreciation + Dividends received)/Opening stock price
= (-5+4.4)/33
-1.82%
Answer = -1.82%