Question

Suppose a stock had an initial price of $90 per share, paid a dividend of $2.40 per share during the year, and had an ending share price of $76. Compute the percentage total return, dividend yield, and capital gains yield. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

Answer 1

Answer:

Percentage total return is -12.89%

Dividend yield is 2.67%

Capital gains yield is -15.56%

Explanation:

Let us start with the dividend yield which is the dividend as a percentage of the initial stock price:

dividend yield=$2.40/$90=2.67%

Capital gains yield is the difference between the ending share price and the initial price divided by the initial price:

capital gains yield=($76-$90)/$90=-15.56%

Total return is the sum of dividend yield and capital gains yield:

total return =-15.56% +2.67%=-12.89%