Question

You purchased a stock for $46.70 a share and resold it one year later. Your total return for the year was 11.2 percent and the dividend yield was 2.8 percent. At what price did you resell the stock?

Please show work, thank you.

Answer 1

Answer:

Stock Price = $46.70

Total Return for the year = 11.2%

Dividend Yield = 2.8%

Therefore, Capital gains yield = 11.2 % - 2.8 % = 8.4 %

PV = Present Value

FV = Future Value

r = Rate of Interest

n = Period

FV = PV * (1+r)^n

Find the Future Value when we know a Present Value, the Interest Rate and number of Periods.

Therefore, putting the values in the above equation, we get:

$46.70 * (1+.084) ^1 = $50.62

The price at which you resell the stock is $50.62

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