One year ago, you purchased 300 shares of stock at a cost of $7,521. The stock paid an annual dividend of $1.10 per share. Today, you sold those shares for $28.20 each. What is the capital gains yield on this investment?
A) 9.96 percent
B) 10.44 percent
C) 12.49 percent
D) 13.33 percent
E) 14.75 percent

Question

Quizplus · Accepted Answer

The initial investment was $7,521 for 300 shares, so the purchase price per share was $7,521/300 = $25.07.

The total dividend received was 300 x $1.10 = $330.

The total sale amount was 300 x $28.20 = $8,460.

The capital gain is the difference between the sale amount and the purchase amount, or $8,460 - $7,521 = $939.

The capital gains yield is the capital gain divided by the initial investment, or $939/$7,521 = 0.1249 or 12.49%.

Therefore, the answer is choice C.

One Year Ago, You Purchased 300 Shares of Stock at a Cost