Question

Phil bought 700 shares of a company’s stock for $9.29/share. He pays a broker a commission of $18 to buy and sell stock. After one year, he sold all his shares, which were worth $9.90/share at that time. What was his rate of return

Answer 1

Answer:

Initially, he bought 700 shares per $9,29 each, so he lost:

payment = 700*$9.29 = $6503

The commision is $18, so the total lost is:

lost = $6503 + $18 = $6521

Now, when he sells, he sell each one to $9.90, so the earned is:

earned: 700*$9.90 = $6930

Then, the profit is the difference in those two quantities:

Profit = earned - lost = $6930 - $6521 = $409

The rate of return will be equal to $409/700 = $0.58, wich means that each share returs $0.58 in the lapse of a year.