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%. |

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