Question

A year ago, Phyllis Peterson purchased 100 shares of Fidelity's Contrafund for $50 each. During the year, her total return from dividends was $1 per share, and there were no capital gains distributions. At the end of the year, the shares were worth $52.50 each. What was Phyllis' RATE (percentage) of return? Begin my calculating her total return.

Answer 1

Phyllis' RATE (percentage) of return is 7 percent

Explanation:

Data provided in the question:

Purchase price for each share = $50

Dividend received = $1 per share

worth of shares at the end of year = $52.50

Thus, total return on the share  = dividend received plus worth of sahres at the end of year minus purchase price

= $1 plus $52.50 minus $50 = $3.5

Therfore, rate of return = [ total return on the shares by purchase price ] into 100%

= [$3.5 by $50] inot 100 percent

= 7 percent

hence, the option with 7 percent will be the correct answer.