Question

An investor bought 100 shares of Copier Corp. for $85 a share. The firm paid an annual dividend of $4 a share; and commissions on the purchase and sale were $75. The price of the stock rose to $120 in one year. What is the percentage earned on the investment if the stock is bought for cash (i.e., the investor did not use margin)

Answer 1

46.44%

Step-by-step explanation:

The computation of the percentage earned on the investment is shown below:

But before that the profit is

Profit = Sale - Commissions - (Cost + Commissions) + Dividends

= ($120 × 100) - $75 - (($85 × 100) + $75) + ($4 × 100)

= $12,000 - $75 - ($8,500 + $75) + $400

= $3,750

Now

Percentage earned on investor's funds is

= $3,750 ÷ $8,075

= 46.44%