PLEASE HELP DUE BEFORE 8PM!!!! 1.) Over the past ten years, a stock had an avera

Question

PLEASE HELP DUE BEFORE 8PM!!!!

1.) Over the past ten years, a stock had an average annual rate of return of 11.6 percent, while T-bills returned 4.8 percent and inflation averaged 4.2 percent. What was the average risk premium on this stock? 2.6 percent 4.3 percent 6.8 percent 7.4 percent

2.) Last year, you purchased a stock for $43 a share. Today, you sold this stock for $44.29 per share. What was the dividend yield if your total return on this stock was 5.26 percent? 0.18 percent 1.64 percent 2.26 percent 2.87 percent

Explanation / Answer

1.Average risk premium=Average annual rate of return-T bill rate

=(11.6-4.8)

=6.8%

2.

Capital gains yield=(End price-Beginning price)/Beginning price

=(44.29-43)/43

=3%

Total rate of return=(End price-Beginning price+Dividends)/Beginning price

=Capital gains yield+Dividend yield

Dividend yield=(5.26-3)

=2.26%

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