Cafe Bustelo pays a constant annual dividend. One year ago, when I purchased shares of this stock at $40 a share, the dividend yield was 6.5 percent. Over this past year, the inflation rate has been 3.2 percent. Today, the required return on this stock is 9.8 percent and I just sold all of my shares. What is my total real return on my investment?
Stock Purcahse price = $40
Dividend Last year=6.5%
Answers a conceptual question on return on investment by providing step-by-step calculations.