Suppose a stock had an initial price of $80 per share, paid a dividend of $0.60

Question

Suppose a stock had an initial price of $80 per share, paid a dividend of $0.60 per share during the year, and had an ending share price of $88. Compute the percentage total return. Last year, you purchased a stock at a price of $82.00 a share. Over the course of the year, you received $3.30 in dividends and inflation averaged 2.7 percent. Today, you sold your shares for $86.70 a share. What is your approximate real rate of return on this investment? Suppose a stock had an initial price of S57 per share, paid a dividend of $1.5 per share during the year, and had an ending share price of $62. Compute the percentage total return.

Explanation / Answer

4> Total Return=(Dividend+Capital Appreciation)/Purchase Price=(0.60+(88-80))*100/80=10.75%

5>Total Return=(Dividend+Capital Appreciation)/Purchase Price=(3.30+(86.70-82))*100/82=9.75%

Return after inflation=9.75-2.7=7.05% ( or say 7.1%)

6>Total Return=(Dividend+Capital Appreciation)/Purchase Price=(1.5+(62-57))*100/57=11.40%

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