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.

Answer 1

Answer:

Hernandezes' total return for his investment is $751.4

Explanation:

Total Return is calculated as

(Sale Price - Purchase Price + dividend)

Effective Sales Price is calculated as  

= (Number of Stocks * Selling Price) - Commissions

= (140 * 35) - 12 = $4,888

Effective Purchase Price is calculated as:  

= (Number of Stocks * Selling Price) + Commissions

= (140 * 31) + 8 = $4,348

Total dividend is calculated as:

= 140 * $1.51 = $211.4

Therefore, Total Return total return is

= (4888 - 4348 + 211.4) = $751.4

Finally, the Rate of Return = 751.4/4348 = 17.28%

Answer 2

Answer:

Total return is 17.28%

Explanation:

The total return on the share is the dividend yield plus the capital gains yield

Dividends yield=dividend/purchase price of share

dividend is $1.51

The purchase price =cost price+broker's commision

cost price is $31

broker's commission is $8

purchase price=(140*$31)+$8

                        =$4348

dividend yield=($1.51*140)/$4348

                       =4.86%

Capital gains yield =(sales value of the share-cost price)/cost price

sales value=(140*$35)-$12

                  =$ 4,888

Capital gains yield=($4,888-$4348)/$4348

                              =12.42%

Total return=4.86% +12.42%

                   =17.28%