Suppose you bought 400 shares of stock at an initial price of $40 per share. The
ID: 2723001 • Letter: S
Question
Suppose you bought 400 shares of stock at an initial price of $40 per share. The stock paid a dividend of $.34 per share during the following year, and the share price at the end of the year was $42.
What is the capital gains yield? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)
What is the dividend yield? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)
What is the total rate of return on the investment? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the"%"sign in your response.)
Suppose you bought 400 shares of stock at an initial price of $40 per share. The stock paid a dividend of $.34 per share during the following year, and the share price at the end of the year was $42.
Explanation / Answer
Capital Gains yield= stock price at the end of year- inital stock price/ Initial stock price
=42-40/40*100
=2/40*100
Capital Gains Yield=5%
Dividen Yield =Dividend for period/Initial Price
=0.34/40*100
Dividen Yield=0.85%
Total Rate of return=FInal Price- Initial Price+ Dividend/ Initial Price
=(42-40+0.34)/40
Total Rate of return=5.85%
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