May 27, 2016

Homework Help: Finance

Posted by Frank on Wednesday, November 15, 2006 at 12:06am.

What is the annual rate of return on an investment in a common stock that cost $40.50 if the current dividend is $1.50 and the growth in the value of the shares and the divedend is 8%.

1.50% (1.04)/40.50 = 3.85% is the dividend yield averaged over one year, relative to the stock value at the begining of the year. Add to this the stock value appreciation of 8.00% and you get a total return of 11.85%

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