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. Compute your total dollar return on this investment.

Answer 1

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%