Calculating Total Return on Stocks

The video tutorial explains how to calculate the total return on a stock, starting with a no dividend stock example using PepsiCo. It demonstrates the formula for total return as the price at sale divided by the purchase price minus one. The tutorial then introduces dividend stocks, showing how dividends affect total return. A detailed example is provided, illustrating the calculation of total return with both capital gains yield and dividend yield, resulting in a comprehensive understanding of stock returns.

What is the first step in calculating the total return on a stock?

• Subtract the initial price from the final price

• Identify the selling price of the stock

• Calculate the price at time zero

• Determine the dividend yield

Which formula component represents the initial purchase price of a stock?

• Price at time one

• Price at time zero

• Dividend yield

• Capital gains yield

What is the significance of the price at time zero in the return calculation?

• It is the initial purchase price

• It is used to calculate the dividend yield

• It represents the selling price

• It is irrelevant to the calculation

In the no dividend example, what was the purchase price of the stock in 2018?

• $100

• $125

• $50

• $150

What was the selling price of the stock in the no dividend example in 2021?

• $150

• $125

• $100

• $175

How does the introduction of dividends affect the calculation of total return?

• It adds a new component to the return

• It decreases the total return

• It doubles the total return

• It eliminates the need for capital gains

What is the primary difference between a no dividend stock and a dividend-paying stock in terms of return calculation?

• No dividend stocks are easier to calculate

• Dividend-paying stocks include an additional yield

• Dividend-paying stocks have no capital gains

• No dividend stocks have a higher return

In the dividend-paying stock example, what was the dividend amount paid at the end of 2019?

• $15

• $20

• $10

• $5

What is the capital gains yield in the dividend-paying stock example?

• 35%

• 25%

• 50%

• 10%

What is the dividend yield in the dividend-paying stock example?

• 15%

• 5%

• 10%

• 20%