Question

Numa's Pompulius pays an annual dividend of $1.41 per share and sells for $34.85 a share based on a market rate of return of 17.9 percent. What is the capital gains yield (in percents)?

Answer 1

Market return is also know as yield to maturity.
Further, Yield to maturity is sum of Dividend yield and capital gain yield.
So, to calculate capital gain yield, Dividend yield is to be calculated.
Dividend yield		=	Annual Dividend/Selling price of share
		=	$       1.41	/	$    34.85
		=	4.05%
So,
Capital Gain yield		=	Market Return - Dividend yield
		=	17.90%	-	4.05%
		=	13.85%
Thus,
Capital gain yield is		13.85%