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An investor buys 1,000 shares of Tundra Enterprises, Inc. at $45 1/2 per share. A year...

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Economics

An investor buys 1,000 shares of Tundra Enterprises, Inc. at $451/2 per share. A year later, he sells his entire position at $531/4. The firm paid a dividend of $0.75 per share during thisperiod. Based on this information, calculate the investor'srealized return

Answer & Explanation Solved by verified expert
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Ans:

investor's realized return = 18.68%

Explanation

Realized return = ((sell price - buy price) * number of shares) + (dividend * number of shares)

                         = (($53.25 - $45.5) * 1000) + ($0.75 * 1000)

                         = ($7.75 * 1000) + ($0.75 * 1000)

                         = $7750 + $750

                         = $8500

Investment = buy price * number of shares

                   = $45.5 * 1000

                   = $45500

investor's realized return = (Realized return / Investment) * 100

                                         = ($8500 / $45500) * 100

                                         = 18.68%
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