You just sold 700 shares of Alcove stock at a price of $34.08 a share.Last year you paid $39.20 a share to buy this stock.You received dividends totalling $1.04 per share.What is your total capital gain on this investment?

Question

Quizplus · Accepted Answer

The total capital gain (or loss) is calculated by taking the difference between the selling price and the buying price, including dividends received. Here, the calculation is: $$(34.08 - 39.20 + 1.04) \times 700 = (-4.08) \times 700 = -2,856$$. However, the correct calculation, considering the dividends correctly, should be: $$(34.08 \times 700) + (1.04 \times 700) - (39.20 \times 700) = 23,856 + 728 - 27,440 = -2,856$$. The mistake in the initial explanation led to the wrong conclusion. The correct approach to find the total capital gain or loss includes considering the total amount from selling the shares, adding the total dividends received, and then subtracting the total amount paid for the shares. The correct calculation is: Selling price (34.08 * 700) + Dividends (1.04 * 700) - Buying price (39.20 * 700). However, the initial response mistakenly provided the answer and explanation for a per-share basis calculation without correctly applying it to the total number of shares. The correct total capital gain or loss should be calculated by considering the total transaction amounts, including the dividends for all shares.

You Just Sold 700 Shares of Alcove Stock at a Price