Question

Gunther earned a 62.5 percent return on a stock that he purchased one year ago. The stock is now worth $12, and he received a dividend of $1 during the year. How much did Gunther originally pay for the stock?

Answer 1

Originally pay for the stock = $8

Step-by-step explanation:

Given:

Total return = 62.5%

Value of stock (after 1 year) = $12

Dividend during the year = $1

Originally pay for the stock = ?

Computation:

`Total\ return = [(Dividend + (Value\ of\ stock\ after\ 1\ year - Purchase\ Value))/(Purchase\ Value) ]* 100`

`62.5 = [(1 + (12 - Purchase\ Value))/(Purchase\ Value) ]* 100\\\\0.625 Purchase\ Value = 1 + 12 - Purchase\ Value\\\\1.625 Purchase\ Value = 13\\\\Purchase\ Value = 8`

Originally pay for the stock = $8