Question

Brandon bought 100 shares of stock for $15.00 per share on 70% margin. Assume Brandon holds the stock for one year and that his interest costs will be $45 over the holding period. Gerry also received dividends amounting to $0.30 per share. Ignoring commissions, what is his percentage return on invested capital if he sells the stock for $34 a share

Answer 1

Answer:

179.52%

Explanation:

The computation of the percentage return is shown below:

Amount invested is

= 15 × 100 × 70%

= $1,050

Now

Total return is

= (100 × $0.3) + 100 × ($34 - $15) - $45

= $1,885

Return on invested capital is

= $1,885 ÷ $1,050

= 179.52%