Question

Raoul made an investment in 155 shares of stock in a load fund for $3,117.05. After one year, the stock had a net asset value of $18.35 per share. If Raoul redeems all 155 shares, which of the following is a correct statement?

Options:
a) Raoul will have a loss of $272.80.
b) Raoul will have a profit of $272.80.
c) Raoul will have a profit of $2,844.25.
d) There is not enough information to calculate profit or loss.

Answer 1

Raoul will have a loss of $272.80. The correct statement is option a)

Step-by-step explanation:

To determine the profit or loss from the investment, we need to calculate the initial cost of the shares and the redemption value. The initial cost of the shares is $3,117.05, which is the total amount Raoul invested. The redemption value is calculated by multiplying the number of shares (155) by the net asset value per share ($18.35), which gives us a total of $2,842.25. To calculate the profit or loss, we subtract the redemption value from the initial cost: $3,117.05 - $2,842.25 = $274.8. Therefore, the correct statement is option a) Raoul will have a loss of $272.80.