4. Rate of return (yield) The rate of return, or yield, is the total return on an investment expressed as a percentage of its purchase price. The rate of return i usually stated on an annualized basis. For example, if you have an investment worth $1,000 that yields $120 of total return per year, then the investment would have a 12% annual rate of return (or yield). Consider the following example: Amira has purchased 100 shares of C&Q Railroad Company stock at a purchase price of $40 per share. Over the next year, C&Q Railroad Company pays a total of $6 per share in dividends to its shareholders. At the end of the year, Amira sells her C&Q Railroad Company stock for $53 per share. In addition, Amira paid a transaction cost of $1 per share both at the time of purchase and at the time of sale. Part A-Current Income (Dividends): in current income in the form of Over the year that Amira owns her shares of C&Q Railroad Company stock, she receives a total of $ dividends. Part B-Capital Gains: The total amount that Amira has paid for her C&Q Railroad Company stock is $ The total amount of money that Amira receives after selling her shares of C&Q Railroad Company stock is $ Therefore, Amira's investment achieves a capital gain of $ Part C-Total Return: Over the year that she owns the C&Q Railroad Company stock, Amira earns a total return of $ Part D-Rate of Return (Yield): The rate of return on an investment is the total return on the investment expressed as a percentage of its price. Calculate the rate of return by dividing the total return by the total purchase price (not including transaction costs because these are already taken into account in the capital gains portion of the total return). Round your rate of return to two decimal places. Therefore, the In the example given, the total return is $ , and the total purchase price (excluding transaction costs) is $ rate of return on Amira's investment in C&Q Railroad Company stock is %. 4. Rate of return (yield) The rate of return, or yield, is the total return on an investment expressed as a percentage of its purchase price. The rate of return i usually stated on an annualized basis. For example, if you have an investment worth $1,000 that yields $120 of total return per year, then the investment would have a 12% annual rate of return (or yield). Consider the following example: Amira has purchased 100 shares of C&Q Railroad Company stock at a purchase price of $40 per share. Over the next year, C&Q Railroad Company pays a total of $6 per share in dividends to its shareholders. At the end of the year, Amira sells her C&Q Railroad Company stock for $53 per share. In addition, Amira paid a transaction cost of $1 per share both at the time of purchase and at the time of sale. Part A-Current Income (Dividends): in current income in the form of Over the year that Amira owns her shares of C&Q Railroad Company stock, she receives a total of $ dividends. Part B-Capital Gains: The total amount that Amira has paid for her C&Q Railroad Company stock is $ The total amount of money that Amira receives after selling her shares of C&Q Railroad Company stock is $ Therefore, Amira's investment achieves a capital gain of $ Part C-Total Return: Over the year that she owns the C&Q Railroad Company stock, Amira earns a total return of $ Part D-Rate of Return (Yield): The rate of return on an investment is the total return on the investment expressed as a percentage of its price. Calculate the rate of return by dividing the total return by the total purchase price (not including transaction costs because these are already taken into account in the capital gains portion of the total return). Round your rate of return to two decimal places. Therefore, the In the example given, the total return is $ , and the total purchase price (excluding transaction costs) is $ rate of return on Amira's investment in C&Q Railroad Company stock is %
