Question

16 years ago, I purchased 142 shares of a stock worth $9.98 per share. There was...

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?

Homework Answers

Answer #1

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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