You bought a stock today for $72.00 per share. You expect to receive a dividend in one year of $1.20 per share; you expect the stock to be worth $74.00 per share in one year. What will be your capital gain yield? (Express your answer as a percentage [5.67%, for example] and round to two decimal places.)

A. 2.78%
B. 4.44%
C. 1.67%
D. 2.70%

A. 2.78%

Explanation:

Capital Gain / loss is the difference between the selling and purchasing prices. Capital gain arises when sales price of an asset is more than purchase price. Capital loss arises when sales price of an asset is less than purchase price.

Capital gain = $74.00 - $72.00 = $2

Capital Gain Yield = Capital Gain / original acquisition cost

Capital Gain Yield = $2 / 72 = 2.78%

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