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15 October, 16:27

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.

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Answers (2)
  1. 15 October, 16:29
    0
    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%
  2. 15 October, 16:53
    0
    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%
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