Suppose you purchase 800 shares of stock at a price of $20 per share. One year l

Question

Suppose you purchase 800 shares of stock at a price of $20 per share. One year later, the shares are selling for $23 per share. In addition, a dividend of $2 per share is paid at the end of each year.
What is the capital gains yield for the investment? What is the dividend yield for the investment? What is the total percentage return for the investment? Suppose you purchase 800 shares of stock at a price of $20 per share. One year later, the shares are selling for $23 per share. In addition, a dividend of $2 per share is paid at the end of each year.
What is the capital gains yield for the investment? What is the dividend yield for the investment? What is the total percentage return for the investment?
What is the capital gains yield for the investment? What is the dividend yield for the investment? What is the total percentage return for the investment?

Explanation / Answer

capital gains yield for the investment = capital gain / purchase cost = (23-20) / 20 = 15%

dividend yield for the investment = dividen / purchase cost = 2/ 20 = 10%

total percentage return for the investment = dividend yield for the investment+capital gains yield for the investment = 10%+15% = 25%

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