Question

# Suppose you bought 1,050 shares of stock at an initial price of \$55 per share. The...

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.)

 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%.