Question

Suppose you buy stock at a price of $43 per share. Three months later, you sell it for $49. You also received a dividend of $0.56 per share. What is your annualized return on this investment?

Answer 1

It is to be noted that where the above parameters are given, the annualized return on this investment is about 60.84%.

You bought the stock for $43 per share and sold it for $49 three months later, with a dividend of $0.56 per share. The total gain or loss is ($49 - $43 + $0.56) = $6.56.

Your initial investment was $43. The holding period is 3 months.

Annualized Return = (Total Gain or Loss / Initial Investment) x (12 / Holding Period)

Annualized Return = ( 6.56 / 43) x (12 / 3)

Annualized Return ≈ 60.84%.

Therefore, your annualized return on this investment is about 60.84%.