Question

An investor purchased 50 shares ofstock in a company for $40 pershare. One year later, the investorsold all the shares for $2,200. Whatis the investor's rate of return?A. 9.1%B. -9.1%C. -10.0%D. 10.0%

Answer 1

Investor purchased 50 shares of stock in a company for $40.

So, the total initial amount he invested is

`50\cdot40=2000`

Then the rate of return is:

`\begin{gathered} \text{rate of return=}\frac{shares\text{ sold price-initial amount invested}}{\text{ initial amount invested}}\cdot100 \\ =(2200-2000)/(2000)\cdot100 \\ =(200)/(2000)\cdot100 \\ =10 \end{gathered}`

So, the requied rate of return is 10.0%.