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If stock is sold three months after it is purchased, the for

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If stock is sold three months after it is purchased, the for

by BTGmoderatorDC » Tue Apr 16, 2019 6:03 pm

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If stock is sold three months after it is purchased, the formula above relates p, d, s, and r, where p is the purchase price of the stock, d is the amount of any dividend received, s is the selling price of the stock, and r is the yield of the investment as a percent. If Rose purchased $400 worth of stock received a $5 dividend and sold the stock for $420, for three months after purchasing it, what was the yield of her investment, according to the formula? (Assuming she paid no commissions.)


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A. 1.25%
B. 5%
C. 6.25%
D. 20%
E. 25%

OA E

Source: Official Guide
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by deloitte247 » Sun Apr 21, 2019 1:51 am
$$r=400\left(\frac{D+S-P}{P}\right)$$
where D = 5 dollar ; S =420 dollar ; and P = 400 dollar
$$r=400\left(\frac{5+420-400}{400}\right)$$
$$r=400\left(\frac{425-400}{400}\right)$$
$$r=\frac{400}{1}\cdot\frac{25}{400}$$
$$r=25$$
$$Answer\ is\ Option\ E$$
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by Jay@ManhattanReview » Mon Apr 22, 2019 12:23 am
BTGmoderatorDC wrote:If stock is sold three months after it is purchased, the formula above relates p, d, s, and r, where p is the purchase price of the stock, d is the amount of any dividend received, s is the selling price of the stock, and r is the yield of the investment as a percent. If Rose purchased $400 worth of stock received a $5 dividend and sold the stock for $420, for three months after purchasing it, what was the yield of her investment, according to the formula? (Assuming she paid no commissions.)


Image

A. 1.25%
B. 5%
C. 6.25%
D. 20%
E. 25%

OA E

Source: Official Guide
From the given information, we have

P = $400, S = $420, and D = $5

Thus, r = 400(5 + 420 - 400)/400 = 25

The correct answer: E

Hope this helps!

-Jay
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