Question

In: Finance

Shares of stock in the Ford Motor Company reached a low of $1.43 on November 10,...

Shares of stock in the Ford Motor Company reached a low of $1.43 on November 10, 2008. One year later, the stock closed at $8.41. If you had invested $20,000 in Ford stock on 11/10/08, buying as many shares as possible while paying an online brokerage fee of $19.99 for the purchase, then sold the stock a year later with the same fee, how much profit would you have made? How much money would you have made per day for holding the stock for a year?

How much profit would you have made? $

How much money would you have made per day (365 days in a year)?

Expert Solution

Buying Price of the share = $1.43

You invested $20,000. The whole amount can't be invested as you need to pay brokerage fees.

Actual Investment = Gross Investment - Brokerage Fee

= $20,000 - $19.99

= $19,980.01

Each share cost $1.43 on the purchasing date, that is 11/10/2008.

Number of shares purchased = Actual Investment / Share Price

= $19,980.01 / 1.43

= 13,972 (Approx)

He sold the share at $8.41 per share.

Gross Selling Price = Total Number of Shares * Share price

= 13,972 * 8.41

= 117,504.52

He will have to pay a brokerage Fee of $19.99.

So net selling price = Gross Selling Price - Brokerage Fee

= 117,504.52 - 19.99

= 117,484.53

So this is the Final Value of the Investment.

Profit = Final Value Of Investment - Inititial Investment

= $117,484.53 - $20,000

= $97,484.53

This is the profit in a year. So daily profit will be

Daily Profit = Yearly Profit / 365

= $97,484.53 / 365

= $267.08

So he made $267.08 per day.

jeff jeffy answered 1 year ago

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