Question

Francis purchased a stock one year ago for $20, and it is now worth $24. The stock paid a dividend of $3 during the year. What was the stock's rate of return from capital appreciation during the year

Answer 1

The correct answer is 20%.

Step-by-step explanation:

According to the scenario, the given data are as follows:

Stock price one year ago = $20

Current stock price = $24

Dividend paid = $3

So, we can calculate the rate of return from capital appreciation by using following formula:

RR from capital appreciation = Capital Appreciation ÷ Start Price

Where Capital Appreciation = $24 - $20 = $4

So, by putting the value we get,

RR from capital appreciation = $4 ÷ $20

= 0.2 or 20%