During the year,Success Ltd shares have increased from $8 to $9 and shareholders received a final dividend of 50 cents per share,fully franked at the company tax rate of 30 per cent.Calculate first the conventional rate of return and second,the dividend yield (using the beginning of the year share price)on Success shares.
A)18.75% and 6.25%.
B)15.18% and 5.5%.
C)18.75% and 5.5%.
D)15.18% and 6.25%.

Question

Quizplus · Accepted Answer

The conventional rate of return is calculated as the change in share price plus the dividend yield, divided by the beginning share price. The dividend yield is calculated as the dividend per share divided by the beginning share price.In this case, the change in share price is $9 - $8 = $1. The dividend yield is 50 cents / $8 = 6.25%. Therefore, the conventional rate of return is (1 + 6.25%) / 8 = 18.75%.

During the Year,Success Ltd Shares Have Increased from $8 to $9