Suppose a stock had an initial price of $80 per share, paid a dividend of $0.60

Question

Suppose a stock had an initial price of $80 per share, paid a dividend of $0.60 per share during the year, and had an ending share price of $88. Compute the percentage total return. (Round your answer to 2 decimal places, (e.g., 32.16)) Last year, you purchased a stock at a price of $82.00 a share. Over the course of the year, you received $3.30 in dividends and inflation averaged 2.7 percent. Today, you sold your shares for $86.70 a share. What is your approximate real rate of return on this investment? Suppose a stock had an initial price of $57 per share, paid a dividend of $1.5 per share during the year, and had an ending share price of $62. Compute the percentage total return.

Explanation / Answer

4)

Total Return = (Ending Share Price - Initial Price + Dividend)/Initial Price

Total Return = (88-80+0.60)/80

Total Return = 10.75%

5)

Total Return = (Ending Share Price - Initial Price + Dividend)/Initial Price

Total Return = (86.70-82 + 3.30)/82

Total Return = 9.76%

Real rate of return = Total Return - Inflation

Real rate of return = 9.76 - 2.7

Real rate of return = 7.06

Real rate of return = 7.1%

Answer

A) 7.1%

6)

Total Return = (Ending Share Price - Initial Price + Dividend)/Initial Price

Total Return = (62-57+1.5)/57

Total Return = 11.40%

Answer

B) 11.40%

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