Question

You invest R1000 in a dividend-paying stock that costs R20 per share and pays R0.80 per year in dividends. Exactly one year later, you sell that same stock at R23 per share. What would be your return on investment?

A. 10%
B. 13%
C. 15%
D. 16%

Answer 1

The return on investment (ROI) for purchasing dividend-paying stock and selling it after one year is 19%, calculated by accounting for both dividends received and capital gain from the increase in stock price. The options provided don't include the correct answer of 19%.

Step-by-step explanation:

The question asks about calculating the return on investment (ROI) for purchasing a dividend-paying stock and selling it after one year. The initial investment was R1000 at a stock price of R20 per share, equaling 50 shares (R1000/R20). The dividends paid per share were R0.80, amounting to R40 for one year (50 shares * R0.80). After one year, the shares were sold at R23 per share, for a total of R1150 (50 shares * R23). The total gain from the dividends and the sale of stock is R190 (R150 from the sale and R40 from dividends). To calculate the ROI, the total gain (R190) is divided by the initial investment (R1000) and then multiplied by 100 to get a percentage, which results in 19%. Therefore, the return on investment is 19%, which is not one of the options provided (options were A. 10%, B. 13%, C. 15%, D. 16%). There appears to be a mistake in the provided options, with the correct answer being higher than any of the choices.