An investor bought 100 shares at $52 per share. During the year, they received dividends of $0.10 per share. At year end, price is $56 per share. What is the annual rate of return?

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Multiple Choice

An investor bought 100 shares at $52 per share. During the year, they received dividends of $0.10 per share. At year end, price is $56 per share. What is the annual rate of return?

This question tests how to compute total return, which combines capital gains and dividend income. The initial investment is 100 shares × $52 = $5,200. At year end, the shares are worth 100 × $56 = $5,600, and the investor also receives dividends of 100 × $0.10 = $10, for a total ending wealth of $5,600 + $10 = $5,610. The gain is $5,610 − $5,200 = $410. The annual rate of return is $410 / $5,200 = approximately 0.079, or 7.89%.

This question tests how to compute total return, which combines capital gains and dividend income. The initial investment is 100 shares × $52 = $5,200. At year end, the shares are worth 100 × $56 = $5,600, and the investor also receives dividends of 100 × $0.10 = $10, for a total ending wealth of $5,600 + $10 = $5,610. The gain is $5,610 − $5,200 = $410. The annual rate of return is $410 / $5,200 = approximately 0.079, or 7.89%.

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