In: Economics
An investor buys 1,000 shares of Tundra Enterprises, Inc. at $45 1/2 per share. A year later, he sells his entire position at $53 1/4. The firm paid a dividend of $0.75 per share during this period. Based on this information, calculate the investor's realized return
Ans:
investor's realized return = 18.68%
Explanation
Realized return = ((sell price - buy price) * number of shares) + (dividend * number of shares)
= (($53.25 - $45.5) * 1000) + ($0.75 * 1000)
= ($7.75 * 1000) + ($0.75 * 1000)
= $7750 + $750
= $8500
Investment = buy price * number of shares
= $45.5 * 1000
= $45500
investor's realized return = (Realized return / Investment) * 100
= ($8500 / $45500) * 100
= 18.68%