If next year's stock price is expected to be $1

Finance Apr 01, 2021

If next year's stock price is expected to be $1.30 arid the current stock price is $1.10, then what is the expected capital gains yield?
O 13.5% • 15.5% O 18.2% 0 17.9% O 16.7%

Expert Solution

Computation of Expected Capital Gain Yield:

Expected Capital Gain Yield = (Next Year Stock's Price-Current Stock Price)/Current Stock Price

= ($1.30-$1.10)/$1.10

= $0.20/$1.10

Expected Capital Gain Yield = 0.182 or 18.2%

So, the correct option is 3rd "18.2%".

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