Sarah bought a stock at a price of 2350 After she owned the

Sarah bought a stock at a price of $23.50. After she owned the stock for 3 months she received a quarterly dividend of $1.00. She sold the stock for $26.00 immediately thereafter. What was her quarterly rate of return?

Solution

Solution:

Information Given:

Current Stock Price (P0)= $ 23.50

Quarterly Dividend (D1) = $ 1.00

Sell Price of Stock after 3 months (P1)= $ 26.00

Quarterly Rate of Return= ???

Rate of Return = D1+(P1-P0)/P0 or Dividend Yield + Capital Gain Yield

Quarterly Rate of Return = 1+(26-23.50)/23.50= 14.89%