If a person buys a share of stock for $60, receives a $5 dividend and one year later sells the stock for $70, what is their return?
15/60 = 0.25
0.25 = 25%
To calculate the return on investment, you need to consider both the capital gain and the dividend received. The return can be expressed as a percentage of the initial investment. Here's how to calculate it step by step:
1. Start with the initial investment: The person bought the stock for $60.
2. Add any dividends received: The person received a $5 dividend.
3. Calculate the capital gain: The person sold the stock for $70. So, the capital gain is the selling price ($70) minus the initial price ($60), which equals $10.
4. Add the capital gain to the dividends: $10 (capital gain) + $5 (dividend) = $15.
5. Calculate the return as a percentage of the initial investment: Divide the total gain ($15) by the initial investment ($60) and multiply by 100 to get the percentage.
($15 / $60) × 100 = 25%.
Therefore, the person's return on investment is 25%.