Question

(12 points)

2. Tom bought 30 shares of a company's stock for $19.72/share. He pays a broker a commission of $11 to buy and sell

stock. After one year, Tom sold all his shares, when they were worth $20.75/share.

A. How much did it cost Tom to buy the stock? Show your work.

B. What was Tom's net gain or loss? Show your work

What was Tom's annual rate of return? Show your work and round to tenth

Answer 1

Explanation:

a.)Buying: total cost

Total cost= commission + (price per share× Number of of shares ) ;

Total cost= 11 + (19.72×30)= $591.6+11= $601.6

b.)Net gain or loss;

First, find cash received from sale of stock and deduct commission;

Cash from sale =20.75×30= $ 622.5

deduct commission= 622.5-11= $611.5

Gain or loss= sale-cost = 611.5-601.6 = $9.9, meaning there is a profit.

c.) Annual rate of return= (net gain or loss/amount paid)×100%

return= 9.9/(601.6)×100 = 1.645%