Question

You purchased 100 shares of Granny Smith stock one year ago. You purchased your stock at $157. 21 per share. You earned $232 in dividends this year. If you sold your all your shares today at the current market value of $217. 58 per share, what would you rate of return be for the year? Calculate the Annual Rate of Return using the formula given to you in the reading assignment

Answer 1

The annual rate of return on the Granny Smith stock purchased is 39.88%

Step-by-step explanation:

What is the annual rate of return?

The annual rate of return is the total return earned when a stock is purchased. It is the sum of the dividend yield and the price appreciation of the stock.

Dividend yield = dividend per share / purchase price

Dividend per share = 232 / 100 = 2.32

Dividend yield = 2.32 / 157.21 = 0.0148 = 1.48%

Price appreciation = (217.58 / 157.21) - 1 = 38.40%

The annual rate of return = 38.40 + 1..48 = 39.88