Chapter 5, Problem 1PROB

Summary Introduction

T sold 1,000 shares at $29 each which were purchased one year ago at $28 each. T received a quarterly dividend of $0.10 per share during the year.

Yield is the return realized and earned on an investment over a specified period.

$\text{Yield}=\frac{\left[\begin{array}{c}\text{No}\text{. of shares}\times \\ \left(\text{Ending price}-\text{Beginning price}\right)\end{array}\right]+\text{Annual dividend}}{\text{No}\text{. of shares}\times \text{Beginning price}}$

Explanation of Solution

Calculate the yield as follows:

$\begin{array}{c}\text{Yield}=\frac{\left[\begin{array}{c}\text{No}\text{. of shares}\times \\ \left(\text{Ending price}-\text{Beginning price}\right)\end{array}\right]+\text{Annual dividend}}{\text{No}\text{. of shares}\times \text{Beginning price}}\\ =\frac{\left[1,000\times \left(\$29-\$28\right)\right]+\left(4\times \$0.10\right)}{1,000\times \$28}\\ =\frac{\$1,000+\$0.4}{\$28,000}\\ =0.0357285714285714\text{ or }3.57\%\end{array}$

Therefore, the yield is $\boxed{3.57\%}$.