What is the percentage return on a stock that was purchased for $43.00, paid quarterly dividends of $1.25, and was then sold after one year for $40.50?
To calculate the percentage return on a stock investment, we need to consider the initial purchase price, any dividends received, and the final selling price.
To find the total dividends received, multiply the quarterly dividend amount ($1.25) by the number of quarters in a year. Since there are 4 quarters in a year, the total dividends received would be 4 x $1.25 = $5.
Next, let's determine the total gain or loss from both the dividends and the selling price. To do this, subtract the initial purchase price from the combined value of the dividends received and the selling price. In this case, the combined value is $5 (dividends) + $40.50 (selling price) = $45.50.
The initial purchase price was $43.00. Therefore, the total gain or loss is $45.50 - $43.00 = $2.50.
To calculate the percentage return, divide the total gain or loss by the initial purchase price, and then multiply by 100 to express it as a percentage. So, $2.50 ÷ $43.00 x 100 = 5.81%.
Therefore, the percentage return on this stock investment is approximately 5.81%.