Math Problem Statement

Question content area top Part 1 Compute the total and annual returns on the described investment. Five years after buying 100 shares of XYZ stock for ​$70 per​ share, you sell the stock for $ 9800. Question content area bottom Part 1 The total return is

enter your response here​%. ​(Do not round until the final answer. Then round to one decimal place as​ needed.)

Solution

To compute the total return on the investment, we use the formula:

Total Return=Ending ValueBeginning ValueBeginning Value×100\text{Total Return} = \frac{\text{Ending Value} - \text{Beginning Value}}{\text{Beginning Value}} \times 100

Step 1: Find the beginning and ending values.

  • Beginning Value: The initial purchase cost is 100 shares at $70 per share. Beginning Value=100×70=7000\text{Beginning Value} = 100 \times 70 = 7000
  • Ending Value: You sell the stock for $9,800.

Step 2: Compute the total return.

Total Return=980070007000×100=28007000×100=40%\text{Total Return} = \frac{9800 - 7000}{7000} \times 100 = \frac{2800}{7000} \times 100 = 40\%

So, the total return is 40%.

Do you want more details or have any questions?


Here are 5 related questions:

  1. How would the total return change if the selling price was $10,000 instead of $9,800?
  2. How do you calculate the annualized return from the total return?
  3. What is the significance of the total return in investment analysis?
  4. How would dividends affect the total return calculation?
  5. What is the difference between simple return and compound return?

Tip: Always consider including transaction costs like brokerage fees when calculating actual returns on investments.

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Math Problem Analysis

Mathematical Concepts

Finance
Investment Returns
Percentage Calculation

Formulas

Total Return = ((Ending Value - Beginning Value) / Beginning Value) * 100
Annual Return = (1 + Total Return)^(1/n) - 1

Theorems

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Suitable Grade Level

Grades 10-12