Question

Sarah and James Hernandez purchased 140 shares of Macy's stock at $31 a share. One year later, they sold the stock for $35 a share. They paid a broker a commision of $8 when they purchased the stock and a commission of $12 when they sold the stock. During the 12-month period the couple owned the stock, Macy's paid dividends that totaled $1.51 a share. Calculate the Hernandezes’ total return for this investment. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Answer 1

Return on your investment (ROI) = 17.31%

Step-by-step explanation:

Return on investment would be the proportion of the amount invested that is earned as profit. Profit here includes dividends earned plus capital gains less broker's commission.

The principles above are illustrated as follows:

Capital gain on stock = stock price at the end - stock price at the beginning

Stock price at the end= 35

stock price at the beginning = 31

Capital gain = (35 - 31)× 140 = 560

Total dividend = 1.51× 140 = 211.4

Commission = 8 + 12 = 20

Net cash return=Capital gain + dividend - commission =560 + 211.4 - 20 =751.4

Return on investment = Net cash return/ cost of stock × 100

ROI = 751.4/ (31×140) × 100 = 17.31%

Return on your investment (ROI) = 17.31%