Francis purchased a stock one year ago for $20, and it is now worth $24. The stock paid a dividend of $3 during the year. What was the stock's rate of return from capital appreciation during the year?
A) 17%
B) 20%
C) 29%
D) 35%

Question

Quizplus · Accepted Answer

The capital appreciation of the stock is the increase in its price, which is $24 - $20 = $4. The rate of return from capital appreciation is the increase in price divided by the original price, multiplied by 100 to express it as a percentage: ($4/$20) x 100 = 20%.

Adding the dividend of $3 to the capital appreciation gives a total return of $4 + $3 = $7. The rate of return of the stock considering both capital appreciation and dividend, is ($7/$20) x 100 = 35%. However, the question is only asking for the rate of return from capital appreciation, so the correct answer is B) 20%.

Francis Purchased a Stock One Year Ago for $20, and It