question 2 M Final Exam O | eztomheducation.com./hm.tpx connect. Brealey: Fundam

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question 2 M Final Exam O | eztomheducation.com./hm.tpx connect. Brealey: Fundamentals of Corp Finas Library Course: SUMMER 2015-02 5610 CCOB 64476: MANAGERIAL F FINANCE Final Exam Question 2 (of 10) 2. 1000 points value: 10.00 points A stock is selling today for $40 pes share. At the end of the year, it pays a dividend of $2 per share and sells for $48. a. What is the total rate of return on the stock? Rate of return b. What are the dividend yield and percentage capital gain? Dividend yield Capital gains yield Check my work

Explanation / Answer

We have:

P0 = 40

P1= 48

D= 2

Dividend yield = D/ P0

                                = 2/40

                                = 5%

Capital Gain Yield = (P1-P0)/P0

                                    = (48-40)/40

                                    =20%

Total rate of return = dividend yield + capital gain yield

                                     = 5% +20%

                                    = 25%

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