Question

You purchased 500 shares of stock six years ago at $21.25 and incurred brokerage fees of $345. You received annual dividends of 27 cents per share. You just sold the stock for $54 and incurred brokerage fees totaling $518, immediately after receiving the sixth annual dividend. Calculate your rate of return.

Answer 1

total expenses = 500(21.25) + 345 + 518 = 11,488
Return = 6(.27)(500) + 500(54) = 27,810

let the rate of return be r
11488(1 + r)^6 = 27810
(1+r)^6 = 2.42078...
take 6th root
1+r = 1.1587..
r = .1587..
the annual return would be appr 15.9%