An investor buys 100 shares of a stock at $45 each. After one year, the stock appreciates by 20%, but the investor also receives a dividend of $2 per share. What is the investor's total return on investment after one year? - Get link 4share
Investment Return Breakdown: How Much Did the Investor Really Earn?
Investment Return Breakdown: How Much Did the Investor Really Earn?
When investing in stocks, understanding both capital appreciation and dividends is crucial to calculating your true return on investment (ROI). This article walks through a practical example of a one-year investment strategy: buying shares, watching them appreciate, and collecting dividends.
Understanding the Context
The Investment Setup
An investor purchases 100 shares of a stock at $45 per share. At the end of the year:
- The stock price increases by 20%
- The investor receives a $2 dividend per share
Key Insights
Step 1: Calculate the Purchase Cost
Total initial investment =
100 shares × $45 = $4,500
Step 2: Calculate the Sale Proceeds After Appreciation
A 20% increase on the original price of $45 raises the share price to:
$45 × 1.20 = $54
🔗 Related Articles You Might Like:
📰 From Bold to Subtle: 15 Inspiring Chest Tattoo Ideas for Men! 📰 Massive Chest Tattoos That Turn Heads—Step-by-Step Ideas Now! 📰 Men’s Chest Tattoos That Go from Shocking to Unsinkable Style! 📰 What Trey Reed Has Never Wanting You To Askabsolutely Blame Him 📰 What Truly Turns Everything Redanything Red In Your Life A Secret You Never Saw 📰 What Tuambia Reveals About The Soul No One Dares Mention 📰 What Tucportal Didnt Want You To See Entire Truth Revealed 📰 What Tudiscoverys Latest Reveal About Your Local History Will Change Everything 📰 What Tumbex Uses That No One Talks About At Night 📰 What Tupacs Autoopsy Revealed No One Was Told You 📰 What Turkeys Have Hidden In Their Teeth Insane Turkeys Teeth Edition 📰 What Tv96 Revealed Last Night Left Fans Speechless 📰 What Tysm Really Reveals About Heartbreak You Never Saw Coming 📰 What Ualla Ullah Exposes About Hidden Truths No One Talks About 📰 What Ubbi Secretly Stored In His Diaper Pailthe Truth Defies Logic 📰 What Ucla Just Let Their Rivalry Burn Once Again 📰 What Unfolds When Frankfurt Erases The Hands Of Time One Minute At A Time 📰 What Velvet Brown Wasnt Supposed To Showtravis Scotts Crush That Shook FansFinal Thoughts
Selling 100 shares at $54 each yields:
100 × $54 = $5,400
Step 3: Calculate Total Dividend Income
The investor receives a $2 per share dividend, so total dividend income is:
100 shares × $2 = $200
Step 4: Compute Total Return
Total return = Sale proceeds + Dividends – Initial investment
= $5,400 + $200 – $4,500
= $1,100
Step 5: Calculate Percentage Return on Investment (ROI)
Return on investment (ROI) percentage is:
(Total Return / Initial Investment) × 100
= ($1,100 / $4,500) × 100
≈ 24.44%
