If D1 = $1.50, g (which is constant) = 6.5%, and P0 = $56, what is the stock's expected capital gains yield for the coming year?

Question

Quizplus · Accepted Answer

The expected capital gains yield is calculated as (D1 - D0) / P0, where D1 is the expected dividend in the coming year, D0 is the current dividend, and P0 is the current stock price. In this case, D1 = $1.50, D0 = $1.50, and P0 = $56. Therefore, the expected capital gains yield is (1.50 - 1.50) / 56 = 0.00.