Home Depot (HD) issued preferred stock shares at a face value of $100 per share with a yield at the time of issuance of 10% 3 years ago. The shares are currently selling for $120 per share. What is the total return of an investor who bought the shares at issuance and held to today (ignore taxes)? What return should an investor buying them today expect?
Home Depot (HD) issued preferred stock shares at a face value of $100 per share with a yield at the time of issuance of 10% 3 years ago. The shares are currently selling for $120 per share. What is the total return of an investor who bought the shares at issuance and held to today (ignore taxes)? What return should an investor buying them today expect?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
Home Depot (HD) issued
- What is the total return of an investor who bought the shares at issuance and held to today (ignore taxes)?
- What return should an investor buying them today expect?
Expert Solution
Step 1: Formula to be used
For Part 1 Total Return = (Current Value / Initial Value) - 1
For Part 2 For an investor buying these shares today, the return they should expect is the dividend yield.
Dividend Yield = (Annual Dividend / Current Price) * 100%
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