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3 November, 01:42

Assume that you purchased 140 shares of Misty Company stock for $78 a share, that you received an annual dividend of $1.60 a share, and that you sold your Misty Company stock for $90 a share at the end of one year. What is the total return for your investment? (Ignore commission amounts for this question.)

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  1. 3 November, 02:30
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    Return (%) = 17.43%

    Explanation:

    The return on investment is the sum of the dividends earned and capital gains made during the holding period of the investment.

    Dividend is the proportion of the profit made by a company which is paid to shareholders.

    Capital gains is another type of the return made on an equity investment as a result of increase in the value of the shares. It is difference between the cost of the share and the value at the time of disposal.

    Therefore, we can can compute the return on the investment as follows:

    Dividend = ($1.60 * 140) = $224

    Capital gains = (90-78) * 140 = $1680

    Total dollar return on Investment = $224 + $1680 = $1904

    Total return in (%) = Return / cost of shares * 100

    = 1904 / (140 * 78) * 100

    = 17.43%
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