Question

If you buy a stock at the beginning of the year at a price of $60, the company pays two quarterly dividends to $2 and then raises their dividend to $3 for the last two quarters of the year, and you sell the stock at the end of the year for $63, what was your return?

Answer 1

Answer:

Our return on the stock was 21.6%

Explanation:

In order to find our return on the stock we need to first add all the dividends and the selling price in order to calculate how much cash inflow we got from the cash. Then we will subtract the buying price of the stock from this as this is a cash outflow and by subtracting the buying price we will get the net cash inflow from the stock, we will then divide the net cash inflow by the buying price to get the return on the stock.

Dividend first quarter = 2

Dividend second quarter = 2

Dividend third quarter = 3

Dividend fourth quarter = 3

Selling price = 63

Total cash inflow = 63+3+3+2+2= 73

Selling price = 60

Net cash inflow = 73-60= 13

Return = 13/60=0.216= 21.6%