Question

Your investment over one year had a realized return of 8. 65% and a dividend of $2. 65. If the

sale price was $42. 58 per share, what was the cost of the investment, assuming you bought it

at the beginning of the period?

Answer 1

Step-by-step explanation:

To solve this problem, we need to use the formula for total return:

Total return = (Ending value - Beginning value + Dividend) / Beginning value

We know the following values from the problem:

- Realized return = 8.65%

- Dividend = $2.65

- Sale price = $42.58

We don't know the beginning value, but we can represent it with a variable, say x. We can set up the equation as follows:

0.0865 = ($42.58 - x + $2.65) / x

Simplifying the right side of the equation:

0.0865x = $45.23 - x

1.0865x = $45.23

x = $41.60 (rounded to two decimal places)

Therefore, the cost of the investment would be $41.60 per share if it was bought at the beginning of the period.

Answer 2

To find the cost of the investment, subtract the dividend and add the realized return to the sale price.

Step-by-step explanation:

To find the cost of the investment, we can use the formula:

Cost of Investment = Sale Price - Dividend + Realized Return

Plugging in the given values, we have:

Cost of Investment = $42.58 - $2.65 + 8.65%

To calculate 8.65% of the sale price, we can multiply $42.58 by 0.0865:

8.65% of $42.58 = $42.58 * 0.0865 = $3.68407

Now we substitute this value back into the formula:

Cost of Investment = $42.58 - $2.65 + $3.68407

Simplifying further, we get:

Cost of Investment = $43.61407