A stock is selling today for $25 per share. At the end of the year, it pays a di

Question

A stock is selling today for $25 per share. At the end of the year, it pays a dividend of $2 per share and sells for $28. a. What is the total rate of return on the stock? (Enter your answer as a whole percent.) Rate of return b. What are the dividend yield and percentag capital gain (Enter your answers as a whole percent.) Dividend yield Capital gains yield c. Now suppose the year-end stock price after the dividend is paid is $21. 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.) Dividend yield Capital gains yield here any change in the dividend yield cpars ) and en The dividend yield is (Click to selec , it is based on the (Click to selec-

Explanation / Answer

a
Total rate of return=(28+2-25)/25=20%
b
Dividend yield=2/25=8%
Capital gains yield=(28-25)/25=12%
c
Dividend yield=2/25=8%
Capital gains yield=(21-25)/25=-16%
d
Dividend yield did not change, as it is based on beginning price

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