Question

A stock that sold for $29 per share at the beginning of the year was selling for $32 at the end of the yeat. If the stock paid a dividend of $1:89 per share, whiat is the simple interest rate on the investment in this stock?

Answer 1

The simple interest rate on the stock investment can be found by adding the capital gain and dividend and then dividing by the initial stock price. For this stock that increased in value by $3 and paid a $1.89 dividend, the simple interest rate is approximately 16.86%.

Step-by-step explanation:

To calculate the simple interest rate on an investment in stock, we need to consider both the increase in stock value and any dividends paid. In this case, the stock increased from $29 to $32, and paid a dividend of $1.89. The total return on this investment is the sum of the capital gains and dividends.

First, we find the capital gain by subtracting the initial stock price from the final stock price:

Capital Gain = Final Stock Price - Initial Stock Price
Capital Gain = $32 - $29
Capital Gain = $3

Next, we add the dividend to the capital gain to find the total return:

Total Return = Capital Gain + Dividend
Total Return = $3 + $1.89
Total Return = $4.89

Now, we calculate the simple interest rate by dividing the total return by the initial investment and converting it to a percentage:

Simple Interest Rate = (Total Return / Initial Investment) x 100
Simple Interest Rate = ($4.89 / $29) x 100
Simple Interest Rate ≈ 16.86%