What is the overall return on an investment if Stock X was bought for $10, sold for $15, and received $5 in dividends?

What is the overall return on an investment if Stock X was bought for $10, sold for $15, and received $5 in dividends?

• A. 50%
• B. 75%
• C. 100%
• D. 125%

Answer: (C)

To determine the overall return on the investment, we need to consider both the capital gains from selling the stock and the dividends received. First, calculate the total gain from selling the stock: - Purchase price: $10 - Selling price: $15 - Capital gain = Selling price - Purchase price = $15 - $10 = $5 Next, include the dividends received: - Dividends received = $5 Now, combine the capital gain and the dividends to find the total return: - Total return = Capital gain + Dividends = $5 + $5 = $10 To find the overall return percentage, divide the total return by the original investment and then multiply by 100: - Overall return percentage = (Total return / Purchase price) × 100 - Overall return percentage = ($10 / $10) × 100 = 100% Thus, the calculation clearly shows that the overall return on the investment is 100%, confirming why this answer is correct.

To determine the overall return on the investment, we need to consider both the capital gains from selling the stock and the dividends received.

First, calculate the total gain from selling the stock:

• Purchase price: $10

• Selling price: $15

• Capital gain = Selling price - Purchase price = $15 - $10 = $5

Next, include the dividends received:

• Dividends received = $5

Now, combine the capital gain and the dividends to find the total return:

• Total return = Capital gain + Dividends = $5 + $5 = $10

To find the overall return percentage, divide the total return by the original investment and then multiply by 100:

• Overall return percentage = (Total return / Purchase price) × 100

• Overall return percentage = ($10 / $10) × 100 = 100%

Thus, the calculation clearly shows that the overall return on the investment is 100%, confirming why this answer is correct.