Question

Which of the following is true if Lisa purchases 80 shares of an IPO for $40 per share and sells the shares for $55 each?

She will have a $15 dividend per share.
She will have a $1200 capital gain.
She will have a 15 percent capital gain.
She will have a 38 percent dividend.

Answer 1

If Lisa purchases 80 shares of an IPO for $40 per share and sells them for $55 each, she will have a $1200 capital gain.

Step-by-step explanation:

If Lisa purchases 80 shares of an IPO for $40 per share and sells the shares for $55 each, she will have a capital gain of $15 per share. Therefore, the statement 'She will have a $1200 capital gain' is incorrect.

To calculate the total capital gain, we multiply the gain per share by the number of shares purchased: $15 x 80 = $1200. So, the correct statement is 'She will have a $1200 capital gain.'

There is no information given about a dividend, so the statements 'She will have a $15 dividend per share' and 'She will have a 38 percent dividend' are both incorrect. Additionally, since the capital gain is $15 per share and the purchase price is $40 per share, the percentage capital gain is (15/40) x 100 = 37.5%. Therefore, the statement 'She will have a 15 percent capital gain' is also incorrect.