Question

9. One year ago, you purchased shares of PQR stock at a price of $30 per share. The stock now sells for $33 per share. In addition, the stock paid a dividend of $1.50 per share during the year. a) Find the stock’s capital gains yield. b) Find the stock’s dividend yield. c) Compute the total dollar return per share of stock d) Calculate the percentage return for the investment in the stock.

Answer 1

Purchase price of Stock one year ago(P0) =$30

Stock selling price now (P1) = $33

Stock Dividend during the year = $1.50

a). Stock's Capital Gain Yield = (P1 - P0)/P0

=($33 - $30)/$30

= 10%

b). Stock’s dividend yield = Dividend/P0

=$1.50/$30

= 5%

c). Total dollar return per share of stock = Dollar Capital gain per share + Dividend per share

= ($33 - $30) + $1.50

= $4.50 per share

d). % return on Investment = Total dollar return per share of stock/Purchase price of Stock

=$4.50/$30

= 15%