coheC value 2000 ponts A stock is selling today for 25 per s

coheC value: 20.00 ponts A stock is selling today for $25 per share. At the end of the year, it pays a dividend of $2 per share and sells for $28. a. What is the total rate of return on the stock? (Enter your anewor as a whole percent) Rate of return b. What are the dividend yield and percentage capital gain? (Enter your anawera as a whole parcent) Dividend yield Capital gains yield . Now suppose the year end stock price after the dividend is paid is $21. What are the dividend yield and percentage capital gain in this case? (Negative amounte ehould be Indicated by a minus eign. Enter your anawere ss a whole percent) Dividend yield Capital gains yield . Is there any change in the dividend yield calculated in parts (b) and (e)? e-??-.it is based on the [Clicktoselec affected The dividend yield is The dividend yield is Clck to unaffected Hints References eBook & Resources Hint #1

Solution

Initial share price per share = $25

Dividend per share = 2

Selling price per share = 28

a) Rate of return = (Selling price per share + Dividend - Initial price per share) / Initial price per share

= ( 28 + 2 - 25) / 25

= 20 %

b) Dividend yield = Dividend per share / Price per share

= $ 2 / 25

= 8 %

Capital gain yield = Capital gain / Price *100

= ( 28 - 25) / 25 *100

= 12%

2) Stock price after dividend is paid = $ 21

Dividend yield = 8 %

Capital gain = $ (4)

Capital gain yield = 4/25 = 16%

Dividend yield is unaffected; as it is based on the initial price, not the final price