Suppose you bought 400 shares of stock at an initial price of $55 per share. The

Question

Suppose you bought 400 shares of stock at an initial price of $55 per share. The stock paid a dividend of $.32 per share during the following year, and the share price at the end of the year was $57.

What is the capital gains yield? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)

What is the dividend yield? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)

What is the total rate of return on the investment? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the"%"sign in your response.)

Suppose you bought 400 shares of stock at an initial price of $55 per share. The stock paid a dividend of $.32 per share during the following year, and the share price at the end of the year was $57.

Explanation / Answer

1. Capital Gain=$57-$55=$2 per share

Total Capital Gain=2*400=$800

Investment=400*55=$22000

Capital Gain Yield=Cap gain/Investment

                             =($800/$22000)*100

                             =3.64%

2.

Dividend per share=$.32

Total Dividend=.32*400=$128

Dividend yield=Dividend/Investment

                         =$128/$22000

                           .58%

3.

Total Return=Cap. Gain Yield+Dividend Yield

                       =3.64%+.58%

                        =4.22%

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