Question

An investor purchases a share of stock today for $27.50 and holds it for a year. During the year the stock pays $4.50 in dividends. The investor sells the stock at the end of the year for $29.25. What is her dividend yield?

Answer 1

Answer:

Dividend yield = 16.3636%

Explanation:

As for the information provided:

Dividend yield = $4.50

And that amount is earned on the investment amount of $27.50.

The current price as stated in the formula is on which you receive the dividend.

Dividend yield = $\frac{4.50}{27.50} \times 100$ = 16.3636%

As the selling price is the price at which the investment in shares is sold.

That the difference in between the selling price and the price at which it is purchased is capital gain.