Question

You purchased shares of stock one year ago at a price of $64.24 per share.

During the year, you received dividend payments of $2.11 and sold the stock for $71.36 per share.


If the inflation rate during the year was 2.75 percent, what was your real return?

Answer 1

11.31%

Step-by-step explanation:

The real share cost (C) is the price at purchas added to the increase due to inflation:

`C = \$64.24*1.0275\\C=\$ 66.00`

The total final value (V) of the share is the selling price added to the dividends payed:

`V= \$71.36 +\$2.11 = \$73.47`

The real return rate (R) is given by:

`R = (V-C)/(C)*100 \%\\R= (73.47-66.00)/(66.00)*100 \%\\R= 11.31\%`

The real return was 11.31%