Question

A year ago, Phyllis Peterson purchased 100 shares of Fidelity's Contrafund for $50 each. During the year, her total return from dividends was $1 per share, and there were no capital gains distributions. At the end of the year, the shares were worth $54 each. What was Phyllis' RATE (percentage) of return? Begin my calculating her total return.A. $1B. 1%C. 5%D. 10%E. 15%

Answer 1

Answer:

option (D) 10%

Explanation:

Data provided in the question:

Purchase price of each share = $50

Dividend received = $1 per share

Worth of shares at the end of the year = $54

Therefore,

Total return on the share

= Dividend received + Worth of shares at the end of the year  - Purchase price

= $1 + $54 - $50

= $5

Therefore,

Rate of return = [ Total return on share ÷ Purchase price ] × 100%

= [ $5 ÷ $50 ] × 100%

= 0.1 × 100%

= 10%

Hence,

option (D) 10%