Question

Six months ago, you purchased 3,000 shares of ABC stock for $47.06 a share. You have received dividend payments equal to $.80 a share. Today, you sold all of your shares for $49.74 a share. What is your total dollar return on this investment?a. $2,400.b. $10,050.c. $8,040.d. $10,440.e. $20,880.

Answer 1

Answer:

Total dollar return = 2400 + 8040 = $10440

Option d is the correct answer

Explanation:

To calculate the total dollar return on the investment, we will calculate the value of dividend received from the shares and the capital gain made on this investment. The capital gain is the appreciation in value less the initial cost paid for the investment.

First we calculate the value of dividend received on the investment.

Dividend received = 3000 * 0.8 = $2400

Now we calculate the value of capital gain.

Capital gain = (Sale price - Initial cost) * Number of shares

Capital gain = (49.74 - 47.06) * 3000

Capital gain = $8040

Total dollar return = 2400 + 8040 = $10440