Final answer:
Tje correct answer is option 3. The capital gains yield on the stock is -15.45% when we do not consider the dividends received. The capital gain was calculated by subtracting the purchase price from the sale price and then dividing by the initial investment amount.
Step-by-step explanation:
To calculate the capital gains yield on the Forever, Incorporated stock, we start with the purchase and sale information provided. The student purchased 630 shares at a price of $48.08 per share and sold the stock for a total of $34,971. To find the capital gains yield, we need to calculate the capital gains and then divide it by the initial investment amount.
First, we determine the total purchase price: 630 shares × $48.08 = $30,290.40. Next, we find the capital gains by subtracting the purchase price from the sale price: $34,971 - $30,290.40 = $4,680.60.
Now, we work out the capital gains yield as a percentage: ($4,680.60 / $30,290.40) × 100 = 15.45%. Hence, the correct answer, regarding the options provided, is -15.45%. It's negative because this calculation does not take into account the dividends received, which were $945 in this scenario. If we wanted to determine the total rate of return including dividends, we'd have to factor in that amount as well. In this case, we're focusing solely on the capital gains yield.