Connie bought 400 shares of ABC Company for $9,288 one year ago.ABC paid a quarterly dividend of $0.40 per share throughout the year, and is currently trading at $24.85 per share.What are the income yield, capital gain yield, and total return for Connie's investment?
A)Income yield = 6.44%; capital gain yield = 6.56%; total return = 13.00%
B)Income yield = 6.56%; capital gain yield = 6.44%; total return = 13.00%
C)Income yield = 6.89%; capital gain yield = 7.02%; total return = 13.91%
D)Income yield = 7.02%; capital gain yield = 6.89%; total return = 13.91%

Question

Quizplus · Accepted Answer

First, calculate the total dividends received: 
$0.40 per share x 400 shares x 4 quarters = $640

Next, calculate the current value of the investment: 
400 shares x $24.85 per share = $9,940

To calculate the income yield, divide the total dividends received by the initial investment: 
$640 / $9,288 = 0.0689 or 6.89%

To calculate the capital gain yield, subtract the initial investment from the current value, and divide by the initial investment: 
($9,940 - $9,288) / $9,288 = 0.0702 or 7.02%

To calculate the total return, add the income yield and capital gain yield: 
6.89% + 7.02% = 13.91%

Therefore, the best choice is C, with an income yield of 6.89%, capital gain yield of 7.02%, and total return of 13.91%.

Connie Bought 400 Shares of ABC Company for $9,288 One