Question

Three years ago, James Matheson bought 250 shares of a mutual fund for $25 a share. During the three-year period, he received total income dividends of 0.60 per share. He also received total capital gain distributions of $0.70 per share during the three-year period. At the end of three years, he sold his shares for $28 a share. What was his total return for this investment?

Answer 1

$ 1,075

Step-by-step explanation:

Given:

Number of shares bought = 250

Cost per share = $ 25

Total amount invested = $ 25 × 250 = $ 6250

Income dividends received per share = $ 0.60 per share

thus,

for 250 share dividends received = $ 0.60 per share × 250 = $ 150

Capital gain per share = $ 0.70

Total capital gain for 250 shares = $ 0.70 × 250 = $ 175

selling cost per share = $ 28

total value obtained from selling the share = $ 28 × 250 = $ 7000

Therefore,

the total income from the share

= dividends received + Total capital gain + total value obtained from selling

or

= $ 150 + $ 175 + $ 7000

or

= $ 7,325

now,

the total return = Total income - Total amount invested

or

= $ 7,325 - $ 6,250

or

total return for the investment = $ 1,075