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return on stock! Can someone help check and see if I am on the right track?
suppose a stock had an initial price of $83 per share, paid a dividend of $1.40 per share during the year, and had an ending share price of $91. What's the percentage return on the stock?
Return =[ Dividend + (end price - Initial Price)]/initial price or P1-Po+PD/Po Return= [1.40+(91.00-83.00)]/83.00 Return= [1.40+8.00]/83.00 Return= 9.40/83.00 Return= 0.11325 Return= 11.33% am I on the right track? |
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Not just on the right track, but you crossed the finish line with the correct answer.
Just as a side note to file away for future reference, the one-year return was 11.33% IF the dividend was paid at or very near the end of the year. If the dividend had actually been received by the shareholder at some earlier point (midway through the year, say), the stock's return would actually be a bit higher than 11.33%, strictly speaking. But when the facts you're given simply say the dividend was received "during the year", the usual convention is to assume it occurred at the end of the year or period in question, and then calculate the return just as you've done here. Good job. |
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