An investor purchases 500 shares of a company at a purchase price of $15.00 at the start of the year. During the year, the company paid out $0.50 of dividends per share. The investor then sells all the shares at a selling price of $13.50. Determine the investor's total percentage return.

Question

Quizplus · Accepted Answer

The total return includes both the capital loss and the dividends received. The capital loss is calculated as (Selling Price - Purchase Price) * Number of Shares = ($13.50 - $15.00) * 500 = -$750. The dividend income is Dividend per Share * Number of Shares = $0.50 * 500 = $250. The total return is the sum of capital loss and dividend income, which is -$750 + $250 = -$500. The percentage return is (Total Return / Initial Investment) * 100 = (-$500 / ($15.00 * 500)) * 100 = -6.67%.

An Investor Purchases 500 Shares of a Company at a Purchase