Answer:
The average annual capital gain for the past two years is -0.114 (-11.4%).
The average annual total return is -0.043 (-4.3%)
Explanation:
We can calculate the average annual capital gain as:
[tex]P_2=P_0(1+g)^2\\\\g=\sqrt{P_2/P_0}-1\\\\g=\sqrt{11/14}-1=0.886-1\\\\g=-0.114[/tex]
As the stocks pays an annual dividend of $1, the dividend return can be calculated as:
[tex]d=div/P_0=1/14=0.071[/tex]
The average annual total return can be calculated as the addition of both the annual capital gain and the dividend return.
[tex]i=g+d=-0.114+0.071=-0.043[/tex]
