Question

You just purchased a share of northstar sports for $100. you expect to receive a divident of $5 in one year. if you expect the price after the dividend is paid to be $110, (a)what total return do you expect to earn over the year? (b)what do you expect to be your dividend yeidl? (c)what do you expect to be your capital gain rate?

Answer 1

The total return is 15%, the dividend yield is 5%, and the capital gain rate is 10%.

Step-by-step explanation:

(a) To calculate the total return, we need to consider both the dividend and the capital gain. The dividend yield is the dividend amount divided by the purchase price of the stock. In this case, the dividend yield is $5/$100 = 0.05 or 5%. The capital gain rate is the increase in the stock price divided by the purchase price. In this case, the capital gain rate is ($110 - $100)/$100 = 0.10 or 10%. The total return is the sum of the dividend yield and the capital gain rate. In this case, the total return is 0.05 + 0.10 = 0.15 or 15%, so you expect to earn a total return of 15% over the year.

(b) The dividend yield is the dividend amount divided by the purchase price of the stock. In this case, the dividend yield is $5/$100 = 0.05 or 5%.

(c) The capital gain rate is the increase in the stock price divided by the purchase price. In this case, the capital gain rate is ($110 - $100)/$100 = 0.10 or 10%.