Question

Omar bought 1000 shares of a company's stock for $15.23/share. If he pays a broker 0.75% commission to buy and sell stock. After one year, he sold all his shares, which were worth $18.78/share. What was his rate of return? Question 38 options: 21.5% 22.4% 22.7% 23.3%

Answer 1

First, let's calculate the total cost of buying the shares:

1000 shares * $15.23/share = $15,230

Next, we need to calculate the commission paid to the broker for buying the shares:

$15,230 * 0.0075 = $114.23

So, the total cost of buying the shares including the commission is:

$15,230 + $114.23 = $15,344.23

Now, let's calculate the total revenue from selling the shares:

1000 shares * $18.78/share = $18,780

We also need to calculate the commission paid to the broker for selling the shares:

$18,780 * 0.0075 = $140.85

So, the total revenue from selling the shares after the commission is:

$18,780 - $140.85 = $18,639.15

The total profit from buying and selling the shares is:

$18,639.15 - $15,344.23 = $3,294.92

The rate of return is the profit divided by the total cost, expressed as a percentage:

($3,294.92 / $15,344.23) * 100% = 21.5%

Therefore, Omar's rate of return is 21.5%.