Question

You purchased shares of stock one year ago at a price of $64.24 per share.
During the year, you received dividend payments of $2.11 and sold the stock for $71.36 per share.


If the inflation rate during the year was 2.75 percent, what was your real return?

Answer 1

Answer:

11.31%

Explanation:

The real share cost (C) is the price at purchas added to the increase due to inflation:

$C = \ 64.24*1.0275\\C=\ 66.00$

The total final value (V) of the share is the selling price added to the dividends payed:

$V= \ 71.36 +\ 2.11 = \ 73.47$

The real return rate (R) is given by:

$R = \frac{V-C}{C}*100 \%\\R= \frac{73.47-66.00}{66.00}*100 \%\\R= 11.31\%$

The real return was 11.31%