If the dividend yield is 4% and the equity repurchase yield is -.5%, what is the total income return? 3.5% or 4.5%?

4-(-0.5) = 4.5%

That’s what I thought.

However, this is actually Q. 5 from 2009CFA Exam and it gives the solution as 3.5%. I dont know why.

I think there is a difference between the term repurchase yield and the term change percentage change in number of shares outstanding. One is the negative of the other ,

The G-K model specifies this term as “percentage change in number of shares oustanding” .

So it should be 4 - (-0.5) or 4.5

The solution to the 2009 Exam says the answer is 3.5%. I do not know whether that is a typo. They say that the income return = 4-.5 = 3.5

not a typo…think about it.

if repurchase yield is negative, that means they issued stock, so your expected return would decrease.

if repurchase yield is positive, that means they bought back stock, so E® would increase

Page 35 Book 5 of CFAI , says " in case of net positive share repurchases , the term delat S is negative so - delta S is a positive repurchase yield"

Does the corollary hold too? In case of negative repurchase yield - delta S is a negative or net negative share repurchases ? Something stinks I think

the formula says subtract the change in shares - if the repurchase yield is negative, that means we issued shares, so the change in shares is positive…so 4.0 - 0.5 = 3.5

Agreed.