The capital gain yield of an equity security is 9.27%.The security paid a quarterly dividend of $0.55 per share during the year.What is the current price of the security if the total return is 13.76 percent?
A)$12.25
B)$13.38
C)$49.00
D)$53.54

Question

Quizplus · Accepted Answer

First, let's calculate the dividend yield:
Dividend yield = (0.55 * 4) / Current price
We multiply the quarterly dividend by 4 to get the annual dividend.
Dividend yield = 2.2 / Current price

Next, we use the total return formula:
Total return = Dividend yield + Capital gain yield
13.76% = Dividend yield + 9.27%
Dividend yield = 4.49%

Now we can solve for the current price:
4.49% = 2.2 / Current price
Current price = 2.2 / 4.49% = $53.54

Therefore, the correct answer is D.

The Capital Gain Yield of an Equity Security Is 9