Part A

Suppose you bought 100 shares of Alibaba Company Ltd at an initial price of $73 per share. The stock paid a dividend of $0.88 per share during the following year, and the share price at the end of the year was $82.

Required:

1. Compute your total dollar return on this investment.
2. Does your answer change if you keep the stock instead of selling it? Why or why not?
3. Calculate the capital gains yield and dividend yield and the total rate of return on the investment.

Part B

Assuming you now decided to buy 750 shares of Alibaba Company Ltd at $73 per share and the dividend paid is also $0.88 per share and the ending share price is $68.40.

Required:

4. Calculate the capital gain yiel

5. Calculate the dividend yield.

6. Would you continue investing in Alibaba Company Limited? Why and why not?