Share
Explore BrainMass

Stock return/current price

Question 1
Stacy purchased a stock last year and sold it today for $3 a share more than her purchase price. She received a total of $0.75 in dividends. Which one of the following statements is correct in relation to this investment?

A. The dividend yield is expressed as a percentage of the selling price.
B. The capital gain would have been less had Stacy not received the dividends.
C. The total dollar return per share is $3.
D. The capital gains yield is positive.
E. The dividend yield is greater than the capital gains yield.

Question 2
Far Side Corporation is expected to pay the following dividends over the next four years: $11, $8, $5, and $2. Afterward, the company pledges to maintain a constant 5 percent growth rate in dividends forever. If the required return on the stock is 12 percent, the current share price is $_____

Solution Preview

1. A. The dividend yield is expressed as a percentage of the selling price.

This is not correct as dividend yield is calculated as D1/P0 that as a percentage of buy price

B. The capital gain would have been less had Stacy not received the dividends.

Capital gains yield depends on change in price and not on ...

Solution Summary

The solution explains two questions relating to stock return and current price of stock

$2.19