An investor purchased 50 shares of stock in a company for $1000. Ône year later, the investor sold all 50 shares for $950. What is the investor's rate of return? A. -5.0%
An investor purchased 50 shares of stock in a company for $1000. Ône year later, the investor sold all 50 shares for $950. What is the investor's rate of return? A. -5.0%
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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![### Selling Stocks
#### Problem Statement:
An investor purchased 50 shares of stock in a company for $1000. One year later, the investor sold all 50 shares for $950. What is the investor's rate of return?
#### Options:
A. -5.0%
B. 5.0%
C. -5.3%
D. 5.3%
---
© 2003 - 2021 Acellus Corporation. All Rights Reserved.
#### Explanation:
To determine the rate of return, you can use the following formula:
\[ \text{Rate of Return (\%)} = \left( \frac{\text{Final Value} - \text{Initial Value}}{\text{Initial Value}} \right) \times 100 \]
In this scenario:
- Initial Value = $1000
- Final Value = $950
Applying these values to the formula:
\[ \text{Rate of Return} = \left( \frac{950 - 1000}{1000} \right) \times 100 = \left( \frac{-50}{1000} \right) \times 100 = -5\% \]
So, the correct answer is:
**A. -5.0%**](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fbbe8c2c5-ca09-4a86-a96c-3518fec3703b%2F27930efa-331d-4830-ae25-f115dbae1870%2F059vgrq_processed.png&w=3840&q=75)
Transcribed Image Text:### Selling Stocks
#### Problem Statement:
An investor purchased 50 shares of stock in a company for $1000. One year later, the investor sold all 50 shares for $950. What is the investor's rate of return?
#### Options:
A. -5.0%
B. 5.0%
C. -5.3%
D. 5.3%
---
© 2003 - 2021 Acellus Corporation. All Rights Reserved.
#### Explanation:
To determine the rate of return, you can use the following formula:
\[ \text{Rate of Return (\%)} = \left( \frac{\text{Final Value} - \text{Initial Value}}{\text{Initial Value}} \right) \times 100 \]
In this scenario:
- Initial Value = $1000
- Final Value = $950
Applying these values to the formula:
\[ \text{Rate of Return} = \left( \frac{950 - 1000}{1000} \right) \times 100 = \left( \frac{-50}{1000} \right) \times 100 = -5\% \]
So, the correct answer is:
**A. -5.0%**
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