Question

you purchased garp stock one year ago at a price of $65.35 per share. today, you sold your stock and earned a total return of 18.47 percent. the stock paid dividends of $2.60 per share over the year. what was the capital gains yield on your investment?

Answer 1

The total return on your investment is 18.47%. This includes both the capital gains yield and the dividend yield.

We can use the following formula to calculate the total return:

Total return = (Ending price - Beginning price + Dividends) / Beginning price

We know that you bought the stock for $65.35 per share. Let's assume you purchased one share of the stock. We also know that the stock paid dividends of $2.60 per share over the year.

To calculate the ending price, we can use the following formula:

Ending price = Beginning price * (1 + Total return)

Plugging in the numbers we have, we get:

Ending price = $65.35 * (1 + 0.1847)
Ending price = $77.52

Now we can use the formula for total return to calculate the capital gains yield:

Total return = (Ending price - Beginning price + Dividends) / Beginning price

0.1847 = ($77.52 - $65.35 + $2.60) / $65.35

0.1847 = $14.77 / $65.35

0.1847 = 0.226

So the capital gains yield on your investment was 22.6%.