A stock is selling today for $50 per share. At the end of the year, it pays a di

Question

A stock is selling today for $50 per share. At the end of the year, it pays a dividend of $2 per share and sells for $57 What is the total rate of return on the stock? (Enter your answer as a whole percent) Rate of return What are the dividend yield and percentage capital gain? (Enter your answers as a whole percent) Now suppose year end stock price after the dividend is paid is $43. What are the dividend yield and percentage capital gain in this case? (Negative amounts should be indicated by a minus sign. Enter your answers as a who is percent.) Is there any change in the dividend yield calculated in parts (b) and (c)?

Explanation / Answer

Answer:a Rate of Return=(capital gain + dividend)/Intial share price

=(57-50)+2/50=18%

Answer:b Dividend yield = dividend/initial share price = $2/$50 = 0.04 = 4%

Capital gains yield = capital gain/initial share price = $7/$50 = 0.14=14%

Answer:c Dividend yield = dividend/initial share price = $2/$50 = 0.04 = 4%

Capital gains yield = capital gain/initial share price = -$7/$50 = -0.14=-14%

Answer:d The dividend yield is same it is based on intial share price.

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.