Answer:
(a) Holding period for stock = 10%
(b) Dividend yield = 1%
(c) Capital gains yield = 9%
Explanation:
Given Data;
Quarterly Dividends = $0.25 = 4* 0.25 = $1.00 (annual dividends)
Purchase Price per share = $100 per share
Current Price per share = $109 per share
(a)
Holding period for stock is calculated using the formula;
Holding Period Return (HPR) = [(Current Price per share – Purchase Price per share) + Annual Dividend Received} / Purchase Price per share] x 100
Substituting into the formula, we have
Holding Period Return (HPR) = [(109 - 100) + 1} / 100] x 100
=[(9 + 1) / 100] x 100
= [10 / 100] x 100
= 0.1 * 100
= 10%
(b)
Dividend yield is calculated using the formula;
Dividend yield = (Dividend received / purchase price of stock
) * 100
= [ (0.25 x 4 ) / 100
] *100
= (1/100) * 100
= 0.01 * 100
= 1%
(c)
The capital gain yield is computed as shown below:
Capital gain yield = ( Current price of stock - purchase price of stock ) / purchase price of stock * 100
Capital gain yield = [($ 109 - $ 100 ) / $ 100
] *100
=( 9/100) * 100
= 0.09 * 100
= 9%
