Question

Suppose a stock sells for $1,200 and pays no dividends. At the end of one year, the stock’s price decreases to $1,000. What is the dollar return on an investment in this stock? $200.00 -$0.17 -$200.00

Answer 1

Answer:

ROI= -$200

Explanation:

Rate of return is also called return on investment. It measires the increase or decrease relative to initial cost of investment.

For example if $500 was invested in a business and eventually it brings in a profit of $20 the return on the initial investment will be the $20 profit. If however there is a loss it will result in a negative return on investment.

In this scenario the stock does not pay any dividends and initial cost was $1,200

To get the return on investment

ROI= Final investment amount - Initial investment amount

ROI= 1,000 - 1,200

ROI= -$200