AmeriCorps industries is expected to pay a dividend of $2.75 in exactly one year. Thereafter, the nominal dividend growth rate is expected to be 6% for 5 years. After that, dividends will grow by 3% per year forever. The annual nominal discount rate is 12.20% and the inflation rate is expected to be 3% annually. Assume all dividends are paid at the end of each year. Say you buy the stock today and hold it for exactly one year. what will your capital gain yield be in that one-year period?

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Capital gain yield is a measure of the profit earned on the investment compared to its initial price ... View the full answer