Question

Shelly buys $1,000 of stocks on January 1st. She earns $50 of dividends during the year and then sells the stock on Dec. 31st for $1,070. What is her yearly return as a percent?

Answer 1

Shelly's yearly return is calculated by dividing her total earnings, which include capital gains and dividends, by her original investment and converting it to a percentage, resulting in a 12% return.

Step-by-step explanation:

Shelly's yearly return as a percent can be calculated by adding her capital gains and dividends earned, and then dividing by the original investment and multiplying by 100 to get a percentage. Shelly's capital gain is the selling price of the stock ($1,070) minus the purchase price ($1,000), which equals $70. Adding the dividends of $50, her total earnings are $120. To find the return rate, divide $120 by the original investment of $1,000 and multiply by 100, which equals a 12% yearly return.