BUSINESS FINANCE FINS1613
Tutorial Week 8
Risk & Return Basics

1

CONTACT DETAILS
Your Tutor + Tutor‐in‐Charge: Peter Andersen peter.andersen@unsw.edu.au

2 FINS1613 — Peter Kjeld Andersen (2013‐S2)

CHAPTER 10: PROBLEM 1
Q. Suppose a share had an initial price of $78, paid a dividend of $1.25 per share during the year and had an ending share price of $87. Compute the percentage total return.
Return(%) 

A.

Capital Gain/Loss  Dividend Initial Price
 $1.25

 $87  $78 
 13.14%

$78

3 FINS1613 — Peter Kjeld Andersen (2013‐S2)

CHAPTER 10: PROBLEM 2
Q. What was the dividend yield in the previous problem? What was the capital gains yield?
Dividend Yield(%) 

A.

$1.25 Dividend  $78 Initial Price

 1.60%

Capital Gains Yield(%) 

Capital Gain/Loss Initial Price



$87  $78  11.54% $78

Return(%)  Capital Gains Yield(%)  Dividend Yield(%)  11.54%  1.60% =13.14%

4 FINS1613 — Peter Kjeld Andersen (2013‐S2)

CHAPTER 10: PROBLEM 3
Q. Rework Problems 1 & 2 assuming that the ending share price is $71.

A.

Dividend Yield(%) 

$1.25 Dividend  $78 Initial Price

 1.60%

Capital Gains Yield(%) 

Capital Gain/Loss Initial Price



$71  $78  8.97% $78

Return(%)  Capital Gains Yield(%)  Dividend Yield(%)  8.97%  1.60% =  7.37%

Capital Gain/Loss  Dividend  $71  $78   $1.25 or....   7.37% Initial Price $78 5
FINS1613 — Peter Kjeld Andersen (2013‐S2)

CHAPTER 10: PROBLEM 4
Suppose you bought an 8% coupon bond one year ago for $1,090. The bond sells today for $1,063. Q. A. Assuming a $1,000 face value, what was your total dollar return on this investment over the past year?
Return($)  Capital Gain/Loss  Coupon   $1, 063  $1, 090   $80  $53

Q.

What was your total nominal rate of return on this investment over that year?
Return(%) 

A.