Sarah and James Hernandez purchased 140 shares of Macys stoc

Sarah and James Hernandez purchased 140 shares of Macy\'s stock at $31 a share. One year later, they sold the stock for $35 a share. They paid a broker a commision of $8 when they purchased the stock and a commission of $12 when they sold the stock. During the 12-month period the couple owned the stock, Macy\'s paid dividends that totaled $1.51 a share. Calculate the Hernandezes’ total return for this investment.

Solution

Total Return = (Sale Price - Purchase Price + dividend)

Effective Sales Price = (Number of Stocks * Selling Price) - Commissions = (140 * 35) - 12 = $4,888

Effective Purchase Price = (Number of Stocks * Selling Price) + Commissions = (140 * 31) + 8 = $4,348

Total dividend = 140 * $1.51 = $211.4

Total Return = (4888 - 4348 + 211.4) = $751.4

{Rate of Return = 751.4/4348 = 17.28%}