Question

3) | Two years ago, you paid $50 per share for JXZC Stock. One year ago, the price was $47 per | ||||||

share and yesterday the price was $54 per share. The stock paid dividends of $1.90 and | |||||||

$2.00 per share in Year 1 and Year 2, respectively. |

a) calculate the total dollar return

b) find the holding period yield

c) find the capital gain over your holding period

d) find the dividend yield over your holding period

e) find the arithmetic average yield over your period

f) find the geometric average yield over your period

Answer #1

Part A:

Dollar Ret = Div + [ P2 - P0 ]

= [ $ 190 + $ 2.00 ] + [ $ 54 - $ 50 ]

= $ 3.90 + $ 4

= $ 7.90

Part B:

Holding period yield = Holding period Ret / P0

= 7.90 / 50

= 0.158 i.e 15.8%

Part C:

Capital gain = P2 - P0

= $ 54 - $ 50

=$ 4

Part D:

Div yield = Div / P0

= [ 3.90 ] / 50

= 7.8%

Part E:

Avg Yiled = Total Yield / 2

= 0.158 / 2

= 0.079 i.e 7.9%

Part F:

geometric Yield = [ 1+ Total Yield } ^ (1/2) -1

= [ 1 + 0.158 ] ^(1/2) - 1

= 1.158^(1/2) - 1

= 1.0761 -1

= 0.0761 i.e 7.61%

Pls do rate, if the answer is correct and comment, if any further assistance is required.

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