P4.3 Assuming you purchased a share of stock for $50 one year ago, sold it today for $60, and during the year received three dividend payments totaling $2.70, calculated the following:
(a) Income
(b) Capital Gain (or loss)
(c) Total Return in Dollars
(d) Total Return as a Percentage of the Initial Investment.
To calculate the various components, we can use the following formulas:
(a) Income = Total dividends received
(b) Capital Gain or Loss = Sale price - Purchase price
(c) Total Return in Dollars = Capital Gain or Loss + Income
(d) Total Return as a Percentage of the Initial Investment = (Total Return in Dollars / Purchase Price) * 100
Let's calculate each component step-by-step:
(a) Income:
Total dividends received = $2.70
(b) Capital Gain or Loss:
Purchase price = $50
Sale price = $60
Capital Gain or Loss = Sale price - Purchase price
Capital Gain or Loss = $60 - $50 = $10
(c) Total Return in Dollars:
Total Return in Dollars = Capital Gain or Loss + Income
Total Return in Dollars = $10 + $2.70 = $12.70
(d) Total Return as a Percentage of the Initial Investment:
Total Return as a Percentage of the Initial Investment = (Total Return in Dollars / Purchase Price) * 100
Total Return as a Percentage of the Initial Investment = ($12.70 / $50) * 100
Total Return as a Percentage of the Initial Investment = 25.4%
Therefore, the calculations are as follows:
(a) Income = $2.70
(b) Capital Gain or Loss = $10
(c) Total Return in Dollars = $12.70
(d) Total Return as a Percentage of the Initial Investment = 25.4%
To calculate the various values, we'll use the following formulas:
(a) Income:
The income is the sum of all dividend payments received during the year.
(b) Capital Gain (or loss):
The capital gain (or loss) is the difference between the selling price and the purchase price of the stock.
(c) Total Return in Dollars:
The total return in dollars is the sum of the income and the capital gain (or loss).
(d) Total Return as a Percentage of the Initial Investment:
The total return as a percentage of the initial investment is the total return in dollars divided by the initial investment, multiplied by 100.
Now, let's calculate the values:
(a) Income:
The total dividend payments received during the year were $2.70.
(b) Capital Gain (or loss):
The purchase price of the stock was $50, and the selling price was $60. Therefore, the capital gain is $60 - $50 = $10.
(c) Total Return in Dollars:
The total return in dollars is the sum of the income and the capital gain (or loss), which is $2.70 + $10 = $12.70.
(d) Total Return as a Percentage of the Initial Investment:
The initial investment was $50. Therefore, the total return as a percentage of the initial investment is ($12.70 / $50) * 100 = 25.4%.
So, the answers to the given questions are:
(a) Income: $2.70
(b) Capital Gain (or loss): $10
(c) Total Return in Dollars: $12.70
(d) Total Return as a Percentage of the Initial Investment: 25.4%