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Stock return/current price

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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 $_____

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Solution Summary

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

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 ...

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