Question: Understanding the Approximate Yield Equation The formula for the approximate yield of an investment can look intimidating, but its really just a function of three
Understanding the Approximate Yield Equation
The formula for the approximate yield of an investment can look intimidating, but its really just a function of three things: (1) average current income, (2) average capital gains, and (3) the average value of the investment. Based on the information in the table, compute each of these values for the two stocks over a 3-year period and enter the values into the bottom half of the table.
| Stock 1 | Stock 2 | |
|---|---|---|
| Expected average annual dividends (20122014) | $0.95 | $2.65 |
| Current stock price | $50 | $119 |
| Expected future stock price (2014) | $62 | $149 |
| Average current income (CI) | $
| $
|
| Average capital gains (CG) | $
| $
|
| Average value of the investment (VI) | $
| $
|
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