Question

You bought a stock a year ago for $50 per share and sold it today for $55. It paid a $1 dividend yesterday. 1. What was your realized return? 2. How much of the return came from the dividend yield and how much came from the capital gain? 3. The same scenario as above, but the stock fell to $45 per share. What is the dividend yield now? What is the capital gain now?

Answer 1

Answer:

(A) $1

(B) dividend 2% 1/6 of the total return

   price 10% 5/6 of the total return

(C) dividen still yield 2%

   capital loss 10%

Explanation:

(A) 1

the realized return are the dividend paid of $1 the increase in the stock price is an unrealizable gain until the stock is sold.

(B)

1/50 = 2% return    1/6 ofthe total return

5/50 = 10% return  5/6 of the total return

total    12% return

(c)

the dividend doesn't change

It will be a capital loss of 10%

45 - 50 = -5

-5/50 = -10%