Question

What is the income, Capital Gain or Loss and total dollar return of a stock that sold at the beginning of the year for $33, paid a $0.75 dividend over the course of a year, and is selling for $36.30 at the end of the year?

2) What is the income, Capital Gain or Loss and total dollar return of a stock that sold at the beginning of the year for $20, paid a $0.60 dividend over the course of 3 months, and is selling for $45.20 at the end of 3 months?

3) What is the income, Capital Gain or Loss and total dollar return of a 5% coupon bond (paid annually) that sold at the beginning of the year for $1015, and is selling for $1025 at the end of the year?

Answer 1

1) Income = Selling price of stock + Dividend - Buying Price = 36.30 + 0.75 - 33 = 4.05
Capital Gain = (36.30-33)/33 = 10%
Total dollar return = (Income/Price of stock) = 4.05/33 = 12.27%

2) Income = Selling price of stock + Dividend - Buying Price = 45.20 + 0.60 - 20 =25.80
Capital Gain = (45.20-20)/20 = 126%
Total dollar return = (Income/Price of stock) = 25.80/20 = 129%

3)Coupon = 5%*1000 = 50
Income = Selling price of bond + Coupon - Buying Price = 1025 +50 -1015 = 65
Capital Gain = (1025-1015)/1015 = 0.985%
Total dollar return = (Income/Price of stock) = 65/1015 = 6.40%

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