QUESTION 1 One year ago, you purchased 300 shares of Southern Cotton at $32.60 a
ID: 2731092 • Letter: Q
Question
QUESTION 1
One year ago, you purchased 300 shares of Southern Cotton at $32.60 a share. During the past year, you received a total of $280 in dividends. Today, you sold your shares for $35.80 a share.
What is your total percentage return on this investment?
8.79 percent
9.64 percent
10.16 percent
11.64 percent
12.68 percent
0.5 points
QUESTION 2
When we refer to the rate of return on an investment, we are generally referring to the:
capital gains yield.
effective annual rate of return.
total percentage return.
dividend yield.
annualized dividend yield.
0.5 points
QUESTION 3
Which one of the following had the highest average return for the period 1926-2012?
U.S. Treasury bills
long-term government bonds
large-company stocks
small-company stocks
intermediate-term government bonds
0.5 points
QUESTION 4
Capital gains are included in the return on an investment:
when either the investment is sold or the investment has been owned for at least one year.
only if the investment is sold and the capital gain is realized.
whenever dividends are paid.
whether or not the investment is sold.
only if the investment incurs a loss in value or is sold.
0.5 points
QUESTION 5
Based on the period of 1926-2012, the risk premium for small-company stocks averaged:
12.3 percent.
13.9 percent.
15.0 percent.
16.8 percent.
17.4 percent.
0.5 points
QUESTION 6
The dividend yield is defined as the annual dividend expressed as a percentage of the:
average stock price.
initial stock price.
ending stock price.
total annual return.
capital gain.
8.79 percent
9.64 percent
10.16 percent
11.64 percent
12.68 percent
Explanation / Answer
1. Total percentage return =
(capital gain yield* + dividend )/ opening investment
= ($960 + 280) ×100 / (300 ×32.6)
=1240×100/9780
=12.68%
*Capital gain = (35.8 -32.6)300 =$960
2. Total percentage return
Reason ; It means overall return receivables whether capital gain or dividend yield on investment during its holding period .
3.
4 .whether or not the investment is sold.
Reason ; Capital gains arises when investment is hold till maturiy, then difference beween opening and closing stock is capital gain.
Capital gain % =( closing investment - opening investment) opening investment
5.
6.initial stock price,
Reason: Dividend yield means dividend earned during the current period on the initial stock price ,
It is calculated as = ( dividend earned × 100/ initial stock price
It is an annualized yield.
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