Suppose a stock had an initial price of $97 per share, paid a dividend of $2.80

Question

Suppose a stock had an initial price of $97 per share, paid a dividend of $2.80 per share during the year, and had an ending share price of $78.00. Requirement 1: Compute the percentage total return. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).) Percentage total return % Requirement 2: What was the dividend yield? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).) Dividend yield % Requirement 3: What was the capital gains yield?

Explanation / Answer

Percentage total return:

= (Sale price+Dividend-Purchase price)÷Purchase price

= ($78+$2.80-$97)÷$97

= -16.70%

Dividend yield:

= Annual dividend/Beginning share price

= $2.80/$97

= 2.87%

Total return = Dividend yield+Capital gains yield

-16.70% = 2.87%+Capital gains yield

Capital gains yield = -19.57%

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