Question

Wanda Sotheby purchased 120 shares of Home Depot stock at $148 a share. One year later, she sold the stock for $140 a share. She paid her broker a commision of $34 when she purchased the stock and a commision of $39 when she sold it. During the 12 months she owned the stock, she received $427 in dividends. Calculate Wanda’s total return on this investment. (A loss should be indicated with a minus sign.)

Answer 1

Wanda’s total return on her investment in Home Depot stock was a loss of $606, taking into account a capital loss of $960, broker's commissions totaling $73, and dividends received of $427.

Step-by-step explanation:

To calculate Wanda’s total return on her investment in Home Depot stock, we must consider the capital loss, the broker’s commission, and the dividends received. First, let's calculate the capital loss. Wanda bought the stock at $148 per share and sold it at $140 per share, which is an $8 loss per share. Multiplying this by the 120 shares gives us a capital loss of $960.

Next, we add the commissions paid on both transactions: $34 when purchasing and $39 when selling, which sums up to $73. Lastly, we consider the dividends received during the year, which amount to $427.

The total return is the sum of the capital loss, the commissions, and the dividends: $427 (dividends) - $960 (capital loss) - $73 (commissions) = a loss of $606.