price of stock is $50 at the beginning of year and $53 at the end of the year, pays dividend of $2 during the year. calculate the stock's current yield, capital gain yield, and the return. show three separate calculations
To calculate the stock's current yield, capital gain yield, and the return, we need to understand the following:
- Current Yield: It represents the ratio of the annual dividend received from the stock to its current market price.
- Capital Gain Yield: It represents the percentage change in the stock's price over a specified time period.
- Return: It represents the total gain or loss from holding the stock, taking into account both the dividend received and the change in stock price.
Calculating the Current Yield:
Current Yield = (Annual Dividend / Current Stock Price) * 100
In this case, the annual dividend is $2, and the current stock price is $50.
Current Yield = (2 / 50) * 100 = 4%
Calculating the Capital Gain Yield:
Capital Gain Yield = ((Ending Stock Price - Beginning Stock Price) / Beginning Stock Price) * 100
In this case, the ending stock price is $53, and the beginning stock price is $50.
Capital Gain Yield = ((53 - 50) / 50) * 100 = 6%
Calculating the Return:
Return = Current Yield + Capital Gain Yield
Using the calculations above:
Return = 4% + 6% = 10%
Therefore, the stock's current yield is 4%, the capital gain yield is 6%, and the overall return is 10%.