Mike Welch purchased 5,000 shares of Grass Roots stock for $82 per share and paid a commission of 1% on the purchase price. The current value of the stock is $96 per share. Mike received no dividends last year.
17%
To calculate the total cost of purchasing the Grass Roots stock, we first need to determine the cost of the shares and the commission paid.
1. Cost of the shares:
Mike purchased 5,000 shares at a price of $82 per share.
Cost of shares = Number of shares * Price per share
Cost of shares = 5,000 * $82 = $410,000
2. Commission paid:
The commission paid is 1% of the purchase price.
Commission = Commission rate * Purchase price
Commission = 1% * $410,000 = $4,100
So, the total cost of purchasing the Grass Roots stock is the sum of the cost of shares and the commission:
Total cost = Cost of shares + Commission
Total cost = $410,000 + $4,100 = $414,100
Next, let's calculate the current value of Mike's stock. The current value is given as $96 per share.
3. Current value of the stock:
Current value = Number of shares * Current price per share
Current value = 5,000 * $96 = $480,000
Now, let's calculate the gain or loss on the investment.
4. Gain or loss on the investment:
Gain or loss = Current value - Total cost
Gain or loss = $480,000 - $414,100 = $65,900
Since Mike did not receive any dividends, the $65,900 represents the gain or loss on his investment in the Grass Roots stock.
To calculate the total cost of the stock purchase, we first need to determine the cost of the shares before the commission.
Step 1: Calculate the cost of the shares without the commission.
The cost per share is $82.
The number of shares purchased is 5,000.
Therefore, the total cost before the commission is 82 * 5,000 = $410,000.
Step 2: Calculate the commission paid.
The commission rate is 1%.
To find the commission amount, we multiply the total cost before the commission by the commission rate: $410,000 * 0.01 = $4,100.
Step 3: Calculate the total cost of the stock purchase.
The total cost of the stock purchase is the cost of the shares before the commission plus the commission paid: $410,000 + $4,100 = $414,100.
Step 4: Calculate the current value of the stock.
The current value per share is $96.
The number of shares purchased is 5,000.
Therefore, the current value of the stock is 96 * 5,000 = $480,000.
Step 5: Calculate the gain or loss.
The gain or loss is the current value of the stock minus the total cost of the stock purchase: $480,000 - $414,100 = $65,900.
In this case, Mike's stock has gained $65,900 since the purchase.