The Toy Box pays an annual dividend of $2.40 per share and sells for $46.60 a share based on a market rate of return of 15 percent. What is the capital gains yield?

Question

Quizplus · Accepted Answer

We can use the formula for total return to find the capital gains yield:

Total return = dividend yield + capital gains yield

Since we know the dividend yield is $2.40/$46.60 = 0.0515, we can solve for the capital gains yield:

0.15 = 0.0515 + capital gains yield
Capital gains yield = 0.15 - 0.0515 = 0.0985 or 9.85%

Therefore, the answer is D.

The Toy Box Pays an Annual Dividend of $2