Question

three years ago James Madison bought 200 shares of a mutual fund $23 a share 23. He receive total income dividends of $.92 per share he also receive total capital gain distributions of $.80 per share during a three-year period at the end of three years he sold his shares for $29 a share what was the total return for this investment

Three years ago, James Matheson bought 200 shares of a mutual fund for $23 a share. During the three-year period, he received total Income dividends of $0.92 per share. He also received total capital gain distributions of $0.80 per share during the three year period. At the end of three years, he sold his shares for $29 a share. What was his total return for this investment? Total return

Answer 1

Solution :

The formula for calculating the Total Return on an Investment is

Total Return = [ Sale price + Dividend earned during the period + Capital gain earned during the period – Purchase Price ]

Calculation of purchase price:

As per the information given in the question we have

200 shares were purchased for $ 23 per share

Thus purchase price = No. of shares * Price per share

= 200 * $ 23

Thus purchase price = $ 4,600

Calculation of Sale price:

As per the information given in the question we have

200 shares were sold for $ 29 per share

Thus sale price = No. of shares * Sale price per share

= 200 * $ 29

Thus Sale price = $ 5,800

Calculation of Dividend earned during the three year period :

As per the information given in the question we have

Dividend per share received over a period of three years = $ 0.92 per share

Total No .of shares = 200

Total Dividend Income earned = Dividend per share received over a period of three years * Total No. of shares

= $ 0.92 * 200

= $ 184

Dividend Income earned during the three years = $ 184

Calculation of Total capital gains distribution earned during the three year period :

As per the information given in the question we have

Total capital gains distribution per share = $ 0.80

Total No .of shares = 200

Total capital gains distribution earned = Total capital gains distribution per share * Total No .of shares

= $ 0.80 * 200

= $ 160

Total capital gains distribution earned = $ 160

Applying the above information in the formula we have

= $ 5,800 + $ 184 + $ 160 - $ 4,600

= $ 1,544

Thus the total return on the Investment = $ 1,544