Question

Bertha purchased 100 shares of BestSnack, Inc. stock for 20 per share; in one year, she sold the 100 shares for25 a share. Over the year, the inflation rate was 3 __________.

1) $500 gain
2) $500 loss
3) $300 gain
4) $300 loss

Answer 1

Bertha purchased 100 shares at $20 per share and sold them at $25 per share, resulting in a numerical gain of $500. This gain represents the difference between the sale revenue and the initial cost. Inflation affects the real value but not the calculation of the gain.

Step-by-step explanation:

When Bertha purchased shares of BestSnack, Inc. stock, she bought 100 shares at $20 per share. The total cost for these shares was 100 shares × $20/share = $2,000. One year later, she sold all 100 shares for $25 a share. The total revenue from this sale was 100 shares × $25/share = $2,500. To calculate her gain, we subtract the initial cost from the final revenue: $2,500 - $2,000 = $500. Therefore, Bertha experienced a $500 gain after selling her shares.

The inflation rate mentioned does not impact the numerical gain from the transaction, but it may affect the real purchasing power of the money earned.