On January 1, a shareholder purchased 81 shares of stock in Beta company for $115 per share. On August 20, the company paid an $8 dividend per share. On December 31, the shareholder sold all the shares for $113 per share. What is the overall Economic Rate of Return for this investment?

Explanation:

Economic rate of return on the investment is as follows

Total Cash Received =

Dividend               =   8

Share disposal     =   113

Total                           121

Total investment  =    115

Net return on investment = 121-115 =  6

Net return on investment = 6/115*100 =5.217%

5.22%

Explanation:

Dividend per share = $8

Loss on sales per share = Purchase price - Sales price -  = $115 - $113 = -$2

Total return per share = Dividend per share - Loss on sales per share

                                      = $8 -$2 = $6

Overall Economic Rate of Return = (Total return per share ÷ purchase price) × 100

Overall Economic Rate of Return = ($6 ÷ $115) × 100

                                                       = 5.217391304347830

                                                       = 5.22% approximately

Therefore, the overall Economic Rate of Return for this investment is 5.22%.                                        

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