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Homework answers / question archive / You purchased a stock for $120 per share today
You purchased a stock for $120 per share today. It will pay a dividend of $8 next month. If you can sell it for $130 right after the dividend is paid, what would be:
a) The dividend yield?
b) What would be its capital gain?
c) What would be its total holding rate of return?
Purchase Price of Stock = $120
Dividend to be paid next month = $8
Price of STock next month = $130
a). Dividend Yield = Dividend/Current or Purchase price = $8/$120
Dividend Yield = 6.67%
b) Capital gain =Price of STock next month - Purchase Price of Stock
Capital gain = $130 - $120
Capital gain = $10
c) Total Holding Rate of Return= (capital gain + Dividend)/Purchase Price
Total Holding Rate of Return = ($10 + $8)/$120
Total Holding Rate of Return = 15%
