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26 July, 21:56

Suppose you bought 400 shares of stock at an initial price of $53 per share. The stock paid a dividend of $0.58 per share during the following year, and the share price at the end of the year was $54.

a. What is the capital gains yield? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

b. What is the dividend yield? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) c. 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.)

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  1. 26 July, 22:20
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    Capital gains yield is the return investors get if their stocks appreciate in value. In this case, the price increases from $53 to $54

    Capital gains yield (CGY) formula = (New price - Old price) / Old price

    CGY = (54-53) / 53

    = 0.01887 or 1.89%

    Dividend yield measure the return from dividend payment on the stock.

    It is calculated as follows;

    Dividend yield = Dividend / Price

    = 0.58 / 53

    =0.01094 or 1.09%

    Total rate of return = capital gains yield + dividend yield

    total return = 0.01887 + 0.01094

    = 0.0298 or 2.98%
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