Suppose you bought 700 shares of stock at an initial price of $42 per share. The

Question

Suppose you bought 700 shares of stock at an initial price of $42 per share. The stock paid a dividend of $.38 per share during the following year, and the share price at the end of the year was $37.

Compute your total dollar return on this investment. (Negative amount should be indicated by a minus sign. Omit the"$" sign in your response.)

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

rev: 09_05_2014_QC_52951

Compute your total dollar return on this investment. (Negative amount should be indicated by a minus sign. Omit the"$" sign in your response.)

Explanation / Answer

a. Number of shares purchased = 700

The purchase price = 42

Purchase amount = 700*42 = 29,400

Dollar profit after an year = Dividended amount + Sale Amount - Purchase price

Dollar profit = 0.38*700 + 37*700 -29,400 = - $3,234 (Negative)

b. Capital Gain yield = (37-42)/42 = -0.1190 = -11.9% (Negative)

c. Dividend Yield = 0.38/42 =0.009047 = 0.905% = 0.90%

d. Total rate of return = (37-42 + 0.38)/42 = -0.11% = -11% (Negative)

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