. Roy purchased 4,000 shares of Ernst stock for $148,920 one year ago. The stock pays annual dividends of $0.35 a share. Today, he sold all of his shares for $42.78 a share. What is his total return on this investment? 

To calculate Roy's total return on his investment, we need to account for both the capital gain (or loss) from selling the stock and the dividends he received during the year. Here's how to compute it step-by-step:

### Step 1: Calculate the initial purchase price
Roy bought 4,000 shares for a total of **$148,920**, so the purchase price per share is:
\[
\text{Purchase price per share} = \frac{148,920}{4,000} = 37.23
\]

### Step 2: Calculate the total selling price
Roy sold all 4,000 shares for **$42.78** each, so the total amount he received from selling the shares is:
\[
\text{Selling price} = 4,000 \times 42.78 = 171,120
\]

### Step 3: Calculate the capital gain
The capital gain (or loss) is the difference between the selling price and the purchase price:
\[
\text{Capital gain} = 171,120 - 148,920 = 22,200
\]

### Step 4: Calculate the dividend income
Roy received annual dividends of **$0.35** per share. Therefore, his total dividend income for the year is:
\[
\text{Total dividends} = 4,000 \times 0.35 = 1,400
\]

### Step 5: Calculate the total return
Roy's total return includes both the capital gain and the dividend income. Therefore, his total return is:
\[
\text{Total return} = 22,200 + 1,400 = 23,600
\]

Thus, Roy's total return on his investment is **$23,600**.

Would you like more details or have any questions?

Here are 5 related questions you might find interesting:
1. How can the percentage return on Roy's investment be calculated?
2. What happens to the total return if the dividend is increased to $0.50 per share?
3. How do you calculate total return if there is a loss instead of a gain?
4. What is the difference between realized gains and unrealized gains in investments?
5. How does dividend yield impact total return in stocks?

**Tip:** Always consider both capital gains and dividends when calculating the total return on an investment.

Roy purchased 4,000 shares of Ernst stock for $148,920 one year ago. The stock pays annual dividends of $0.35 a share. Today, he sold all of his shares for $42.78 a share. What is his total return on this investment?

Learn how to calculate the total return on an investment involving capital gains and dividend income. In this example, Roy purchases 4,000 shares of stock, sells them after a year, and earns dividends. Step-by-step solution provided. Suitable for finance students.

Math Problem Statement

Solution

Ask a new question for Free

By Image

Math Problem Analysis

Mathematical Concepts

Formulas

Theorems

Suitable Grade Level

Related Recommendation