Question

You bought a stock one year ago for ​$50.00 per share and sold it today for ​$55.00 per share. It paid a ​$1.00 per share dividend today. a. What was your realized​ return? b. How much of the return came from dividend yield and how much came from capital​ gain?

Answer 1

Answer:

A) the realized return is 12%, B) the dividend yield is 2% and the capital gain is 10% .

Explanation:

A) Calculating the realized return by using formula-

Dividend + (selling price - purchase price)  /  purchase price

= $1 + ($55-$50)  / $50

= $1 + $5 / $50

= $6 / $50

= .12

now multiplying it by 100 to make it in percentage.

= 12%

B) Calculating the dividend yield by using formula -

Annual Dividend / Purchase price

= $1 / $50

= .02

now multiplying by 100 to make it in to percentage

= 2%

Calculating capital gain by using formula -

Selling price - Purchase price  / Purchase price

= $55 - $50  /  $50

= $ 5  / $50

= .10

now multiplying by 100 to make it in to percentage

= 10%