The ordinary equity of Grady had an 11.25% rate of return last year.The dividend amount was €.70 a share which equated to a dividend yield of 1.5%.What was the rate of price appreciation on the equity?

Question

Quizplus · Accepted Answer

Total return on equity = Dividend yield + Price appreciation rate 
Dividend yield = (Dividend amount / Price per share) x 100
1.5% = (0.70 / Price per share) x 100 
Price per share = 0.70 / 0.015 = 46.67 
Total return on equity = 11.25% 
11.25% = 1.5% + Price appreciation rate 
Price appreciation rate = 11.25% - 1.5% = 9.75% 
Therefore, the rate of price appreciation on the equity was 9.75%. Option C is correct.

The Ordinary Equity of Grady Had an 11