Question

Suppose a stock had an initial price of $74 per share, paid a dividend of $0.80 per share during the year, and had an ending share price of $77. What was the capital gains yield?

2.70 percent
3.29 percent
3.78 percent
4.05 percent
4.94 percent

Answer 1

The capital gains yield for a stock with an initial price of $74 and an ending price of $77 is 4.05%, answer D.

Step-by-step explanation:

To calculate the capital gains yield on a stock investment, you need to compare the ending share price with the initial share price, without considering the dividends received. The formula to determine the capital gains yield is: (Ending Price - Initial Price) ÷ Initial Price. For the stock in question, the initial price was $74 per share and the ending share price was $77 per share.

The calculation for the capital gains yield is therefore ($77 - $74) ÷ $74 = $3 ÷ $74 ≈ 0.04054 or 4.05%. The correct answer to the student's question is D. 4.05 percent.