16 years ago, I purchased 142 shares of a stock worth $9.98 per share. There was a 2:1 split, a 4:1 split, and a 4:1 split during that time period. Today the stock is worth $1.94 per share. If the dividend yield was on average 14% during the last 16 years, what was the total rate of return?
Sol- The solution of the above question is as follows -
Cost of 1 share is = $9.98
Cost of share after 1st split = $9.98 / 2 = $4.99
Cost of the share after 2nd split = $4.99 / 4 = $1.24
Cost of share after 3rd split = $1.24 / 4 = $0.311
Today stock worth is = $1.94 per share
Capital gain during the period = (Market price - cost) / cost
= (1.94 - 0.311)/0.311
= 5.23%
Dividend yield = 14%
Total rate of return = Capital gain + dividend yield
= 5.23% + 14%
= 19.23%
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