You purchased a stock at the end of the prior year at a price of $85. At the end

Question

You purchased a stock at the end of the prior year at a price of $85. At the end of this year the stock pays a dividend of $2.20 and you sell the stock for $92. What is your return for the year? Now suppose that dividends are taxed at 15 percent and long-term capital gains (over 11 months) are taxed at 30 percent. What is your aftertax return for the year? (Round your answer to 2 decimal places. Omit the "%" sign in your response.)

You purchased a stock at the end of the prior year at a price of $85. At the end of this year the stock pays a dividend of $2.20 and you sell the stock for $92. What is your return for the year? Now suppose that dividends are taxed at 15 percent and long-term capital gains (over 11 months) are taxed at 30 percent. What is your aftertax return for the year? (Round your answer to 2 decimal places. Omit the "%" sign in your response.)

Explanation / Answer

Pretax return : $2.2 + ($92-$85) / $85 *100 = 10.82 %

Post tax retrurn :$2.2(1-0.15) + $7(1-0.30) /$85 *100 = 7.96%

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