P4.3 Assuming you purchased a share of stock for $50 one year ago, sold it today for $60, and during the year received 3 dividend payments totaling $2.70, calculate the following.
a. Income b. Capital gain (or loss) c. Total return
(1) In dollars (2) As a percentage of the initial investmen
Income: $2.70 -- 5.4%
Capital gain: $10 -- 20%
Total return: $12.70 -- 25.4%
GOOD
To calculate the income, capital gain, and total return, we can use the following formulas:
a. Income = Dividend payments received
b. Capital gain (or loss) = Selling price - Buying price
c. Total return = (Dividend payments + Selling price - Buying price) / Buying price
Given the following information:
Buying price = $50
Selling price = $60
Dividend payments = $2.70
a. Income = $2.70
b. Capital gain (or loss) = $60 - $50 = $10
c. Total return = ($2.70 + $60 - $50) / $50 = $12.70 / $50 = 0.254
To calculate the total return as a percentage, multiply the result by 100:
c. Total return = 0.254 * 100 = 25.4%
Therefore, the answers are:
a. Income = $2.70
b. Capital gain (or loss) = $10
c. Total return = $12.70 or 25.4%
To calculate the income, capital gain (or loss), and total return, we can follow these steps:
Step 1: Calculate the income
To calculate the income, add up all the dividend payments received. In this case, we received 3 dividend payments totaling $2.70, so the income is $2.70.
Step 2: Calculate the capital gain (or loss)
To calculate the capital gain (or loss), subtract the initial purchase price from the final selling price. In this case, the initial purchase price was $50 and the selling price is $60, so the capital gain is $60 - $50 = $10.
Step 3: Calculate the total return
To calculate the total return, add the income and the capital gain (or loss) together. In this case, the income is $2.70 and the capital gain is $10, so the total return is $2.70 + $10 = $12.70.
Step 4: Convert the results to percentages
To calculate the percentage of the initial investment, divide each result by the initial purchase price ($50) and multiply by 100.
a. Income:
$2.70 / $50 * 100 = 5.4%
b. Capital gain (or loss):
$10 / $50 * 100 = 20%
c. Total return:
$12.70 / $50 * 100 = 25.4%
Therefore, the answers are:
a. Income: $2.70 (5.4%)
b. Capital gain (or loss): $10 (20%)
c. Total return: $12.70 (25.4%)