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ROI Calculation - Cafe Bustelo common stock transaction

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?
1.-31.87 percent
2.-29.43 percent
3.-26.67 percent
4.-25.48 percent
5.-23.09 percent

Solution Preview

Stock Purcahse price = $40
Dividend Last year=6.5%
Constant ...

Solution Summary

Answers a conceptual question on return on investment by providing step-by-step calculations.