Question

Phil bought 700 shares of a company’s stock for $9.29/share. He pays a broker a commission of $18 to buy and sell stock. After one year, he sold all his shares, which were worth $9.90/share at that time. What was his rate of return

Answer 1

The rate of return is 6.5% .

Explanation:

As given

Phil bought 700 shares of a company’s stock for $9.29/share.

He pays a broker a commission of $18 to buy and sell stock.

After one year, he sold all his shares, which were worth $9.90/share at that time.

Cost price of the 700 shares of a company = 700 × Cost per share + Commission cost .

Cost price of the 700 shares of a company = 700 × 9.29 + 18

= 6503 + 18

= $ 6521

Selling st price of the 700 shares of a company = 700 × Cost per share + Commission cost .

Selling st price of the 700 shares of a company = 700 × 9.90 + 18

= 6930 + 18

= $ 6948

`Rate\ of\ return = ((Selling\ price\ of\ the\ 700\ shares-Cost\ price\ of\ the\ 700\ shares)* 100)/(Cost\ price\ of\ the\ 700\ shares)`

Put all the values in the above

`Rate\ of\ return = ((6948 - 6521)* 100)/(6521)`

`Rate\ of\ return = (427* 100)/(6521)`

`Rate\ of\ return = (42700)/(6521)`

Rate of return = 6.5%

Therefore the rate of return is 6.5% .