Nancy Cotton bought 400 shares of NeTalk for $15 per share. One year later, Nanc

Question

Nancy Cotton bought 400 shares of NeTalk for $15 per share. One year later, Nancy sold the stock for $20 per share, just after she received a $0.50 cash dividend from the company.

a. What is the total dollar return earned by Nancy for the year?

b. What is the rate of return earned by Nancy?

c. Separate the rate of return computed in part (b) into the dividend yield and the capital gain. In other words, compute the dividend yield and the capital gain that Nancy earned by holding NeTalk for one year.

Please show work, so I can work out my homework problems.

Explanation / Answer

Ans)

Gain On Sale (20-15)*400 2000 Cash dividend .50*400 200 Total return 2000+200 2200 Cost of Share 400*15 6000 A) Total Rate of return 2200/6000*100 36.67 b) Rate of Return 200/6000*100 3.33 c) Capital Gain 20-15*400 2000 Dividend Yeild .50*400 200

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