Homework Chapter 7 Question 11 A stock was priced at $150 per share at the end o
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Question
Homework Chapter 7 Question 11
A stock was priced at $150 per share at the end of 2005. The following table shows dividends per share paid during each year and the price of the stock at the end of the year for the following four years. Year Dividends Paid During Year Stock Price at End of Year
2006 $3.00 $125
2007 $3.00 $150
2008 $3.50 $155
2009 $4.00 $200
For each year from 2006 to 2009, calculate the dividend yield, the capital gains yields, and the total return to the stock. Express your calculations in percentage terms.
Explanation / Answer
Dividend yield = current dividend/current price
YOUR annual dividend yield (assuming you purchase in 2005 for $150 = current dividend/$150
cap gain yield: (current price - $150)/$150
Your total return: (dividends + cap gain)/ $150...assuming an "as if" you sold in the given year...
2006: $3 + (125 - 150) = (22)/150 = (0.146667) or (14.6667%)
2007: $3 + $3 + (150 - 150) / 150 = 0.04 = 4.0%
2008: 3 + 3+ 3.50 + (155 - 150) / 150 = 0.096667, or 9.6667%
2009: 3 + 3+ 3.50 + 4 + (155 - 150) / 150 = 0.123333, or 12.333%Dividend yield = current dividend/current price
YOUR annual dividend yield (assuming you purchase in 2007 for $150 = current dividend/$150
cap gain yield: (current price - $150)/$150
Your total return: (dividends + cap gain)/ $150...assuming an "as if" you sold in the given year...
2006: $3 + (125 - 150) = (22)/150 = (0.146667) or (14.6667%)
2007: $3 + $3 + (150 - 150) / 150 = 0.04 = 4.0%
2008: 3 + 3+ 3.50 + (155 - 150) / 150 = 0.096667, or 9.6667%
2009: 3 + 3+ 3.50 + 4 + (155 - 150) / 150 = 0.123333, or 12.333%
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