Use the table for the question(s)below.
Consider the following price and dividend data for Cockatoo Limited:

-Assume that you purchased Cockatoo shares at the closing price on 31 December 2015 and sold it after the dividend had been paid at the closing price on 26 January 2016. Your dividend yield for this period is closest to:
A)-8.15%
B)0.70%
C)-8.80%
D)0.75%

Question

Use the table for the question(s)below.
Consider the following price and dividend data for Cockatoo Limited:
 
-Assume that you purchased Cockatoo shares at the closing price on 31 December 2015 and sold it after the dividend had been paid at the closing price on 26 January 2016. Your dividend yield for this period is closest to:
A)-8.15% 
B)0.70% 
C)-8.80% 
D)0.75%

Quizplus · Accepted Answer

To calculate the dividend yield, we need to use the formula: 
Dividend yield = (Dividend paid / Purchase price) x 100%
The purchase price on 31 December 2015 was $3.20 and the dividend paid on 15 January 2016 was $0.01. So, 
Dividend yield = (0.01 / 3.20) x 100% = 0.3125%
However, we also need to take into account the change in share price. The selling price on 26 January 2016 was $2.90. So, the capital loss is: 
Capital loss = (Selling price - Purchase price) / Purchase price x 100%
Capital loss = (2.90 - 3.20) / 3.20 x 100% = -9.375%
Therefore, the overall return for this period is the sum of the dividend yield and the capital loss, which is: 
Overall return = Dividend yield + Capital loss 
Overall return = 0.3125% - 9.375% = -9.0625%
This is a negative return, which means that the investor incurred a loss. However, the closest answer choice to the calculated dividend yield is B) 0.70% .

Use the Table for the Question(s)below