Question

Suppose a stock sells for $800 and pays no dividends. At the end of one year, the stock’s price decreases to $700. What is the dollar return on investment in this stock?

Answer 1

-$100

Step-by-step explanation:

Given that,

Initially, the selling price of a stock = $800

After one year, the selling price of a stock decreases to $700.

Dividends paid = $0

Dollar return:

= Ending selling price - Beginning selling price + Dividends paid

= $700 - $800 + $0

= (-$100)

Therefore, the dollar return on investment in this stock is (-$100). Investment is said to have a negative rate of return.