Gary purchased 250 shares of PAC stock for $37 per share and sold this same stock one year later for $44 per share.He paid commissions of $15 when he purchased the stock and $10 when he sold the stock.Dividends of $1.50 per share were paid during the year.The total rate of return on this investment was
A)22.98 percent.
B)22.70 percent.
C)18.92 percent.
D)19.32 percent.

Question

Quizplus · Accepted Answer

First, let's calculate the total cost of the investment:

250 shares x $37 per share = $9,250 (purchase price)
+ $15 commission when purchased = $9,265 (total cost)

Next, let's calculate the total income from the investment:

250 shares x $1.50 per share = $375 (total dividends)

Now, let's calculate the total proceeds from selling the stock:

250 shares x $44 per share = $11,000 (selling price)
- $10 commission when sold = $10,990 (total proceeds)

Finally, let's calculate the total rate of return:

Total return = (total proceeds + total income - total cost) / total cost
Total return = ($10,990 + $375 - $9,265) / $9,265
Total return = $1,100 / $9,265
Total return = 0.1187 or 11.87%

To convert this to a percentage, we multiply by 100:

Total rate of return = 11.87%

Therefore, the closest percentage to the calculated rate of return is 22.70%, which is answer B.

Gary Purchased 250 Shares of PAC Stock for $37 Per