A stock is selling today for $60 per share. At the end of the year, it pays a di

Question

A stock is selling today for $60 per share. At the end of the year, it pays a dividend of $3 per share and sells for $63.

a. What is the total rate of return on the stock? (Enter your answer as a whole percent.)

b. What are the dividend yield and percentage capital gain? (Enter your answers as a whole percent.)

c. Now suppose the year-end stock price after the dividend is paid is $54. 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 whole percent.)

d. Is there any change in the dividend yield calculated in parts (b) and (c)?

For Part D, it is either affected/unaffected and it is based on intial price/first price. Choose one of each

Explanation / Answer

rate of return = dividend+(year end sale price-purchase price) / purchase price

3+(63-60) / 60 = 6/60= .1*100 = 10%

2-Dividend Yield = dividend paid/purchase price = (3/60)*100 = 5%

capital gain Yield = capital gain/purchase price = (63-60)/60 = 5%

C-

Dividend Yield = dividend paid/purchase price = (3/60)*100 = 5%

capital gain Yield = capital gain/purchase price = (54-60)/60 = -6/60 = -.1*100 = -10%

D- there is no change in the dividend yield calculated in parts (b) & (c)

Unaffected  and it is based on intial price/first price

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

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