Question

Suppose you bought 1,050 shares of stock at an initial price of $55 per share. The stock paid a dividend of $0.64 per share during the following year, and the share price at the end of the year was $50.

a. Compute your total dollar return on this investment. (A negative value should be indicated by a minus sign.)

b. What is the capital gains yield? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

c. What is the dividend yield? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

d. What is the total rate of return on the investment? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

Answer 1

	Number of shares	1050
	Initial price	55
	Dividend	0.64
	Ending price	50
a)	The dollar return	1050*50 - 1050*55 + 1050*.64
	The dollar return	-4578
b)	Capital gains yield	(50 - 55)/55
	Capital gains yield	-0.090909091
	The capital gains yield is -9.09%.
c)	Dividend yield	(.64)/55
	Dividend yield	0.011636364
	The Dividend yield is 1.16%.
d)	Total return = capital gains yield + dividend yield
	Total return	(-9.09% + 1.16%)
	Total return	-0.0793
	The total return is -7.93%.