Two years ago, you purchased 100 shares of Coca-Cola Company. Your purchase pric

Question

Two years ago, you purchased 100 shares of Coca-Cola Company. Your purchase price was $58 a share, plus a total commission of $30 to purchase the stock. During the last two years, you have received the following dividend amounts: $1.65 per share for the first year and $1.77 per share the second year. Also, assume that at the end of two years, you sold your Coca-Cola stock for $67 a share minus a total commission of $40 to sell the stock. (a) Calculate the dividend yield for your Coca Cola stock at the time you purchased it. (Enter your answer as a percent rounded to 2 decimal places.) Dividend yield at purchase (b) Calculate the dividend yield for your Coca-Cola stock at the time you sold it. (Enter your answer as a percent rounded to 2 decimal places.) Dividend yield at sale (c) Calculate the total return for your Coca-Cola investment when you sold the stock at the end of two years. (Do not round intermediate calculations. Round your final answer to the nearest whole number.) Total return (d) Calculate the annualized holding period yield for your Coca-Cola investment at the end of the two-year period. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

Explanation / Answer

No of shares purchased = 100 purchse price ($58 per share) = $5,800 (58$*100) Add: Commission $30 Total Purchase Cost $5,830 Dividend received Y1 =$1.65/share 165 Y2 = $1.77 177 Sales value = $67/share 6700 Less:Commission $40 Net Sales consideration $6,660 A Dividend yield at thetime of purchase =Annual Dividend amount/price per share =1.65/$58 2.84% B Dividend yield at the time of sale =Annual Dividend amountat year 2/sales price per share =1.77/67 2.64% C the total return for your Coca-Cola investment when you sold the stock at the end of two years. Current Return = ($1.65 per share + $1.77 per share) 100 shares = $342 Capital Gain = ( Net Sales Consideration-Total Purchase Cost ) =6660-5830 = $830 Total Return Dividend+CapitalGain =342+830 $1,172 D the holding period return for your Coca-Cola investment at the end of the two-year period. return = profit/initial investments Initial Investment = Total Purchase Cost Profot = Total Gain return = profit/initial investments ;=$1172/5830                                                  20.10 %

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