You purchase shares of BH Inc.at the beginning of the year for $30 per share.After receiving dividends of $4 per share,you sell at the end of the year for $20 per share.What is your one year rate of return?
A)20%
B)-20%
C)-46.66%
D)70%

Question

Quizplus · Accepted Answer

To calculate one year rate of return, we need to subtract the initial cost of the shares from the total amount received at the end of the year and divide the result by the initial cost.

Initial cost = $30 per share 
Dividends received = $4 per share 
Amount received at the end of the year = $20 per share

Total return = dividends received + amount received at the end of the year
= $4 + $20 = $24 per share

One year rate of return = (total return - initial cost)/initial cost x 100
= ($24 - $30)/$30 x 100
= -$6/$30 x 100
= -20%

Therefore, the correct answer is B, which represents a negative rate of return of 20%.

You Purchase Shares of BH Inc