Consider a stock which was selling for $50 at the beginning of the year. Use thi
ID: 2789651 • Letter: C
Question
Consider a stock which was selling for $50 at the beginning of the year. Use this stock for this question (Question 2) and the next question (Question 3).
If price of this stock climbed to $52 at the end of the year, what was the capital gain yield for the year?
10.0%
The stock in Question 2, above, had a price of $50 at the beginning of the year and a price of $52 at the end of the year. If the stock paid a dividend of $1.50 during the year, what was the dividend yield?
10.00%
Over a five-year period, the returns on an investment were: 5%, 15%, –14%, 16%, –11%. What was the geometric average return?
2.0%Explanation / Answer
1.Capital gain yield=(End price-Beginning price)/Beginning price
=(52-50)/50
=4%
2,Dividend yield=Dividend/Current price
=(1.5/50)
=3%
3.geometric average return=[(1+rate1)(1+rate2)(1+rate3)(1+rate4)(1+rate5)]^(1/5)-1
=[(1+0.05)(1+0.15))(1-0.14)(1+0.16)(1-0.11)]^(1/5)-1
=1.402%(Approx)