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A person buys a share for $50 and sells it for $52 after a year. What

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4128851
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A person buys a share for $50 and sells it for $52 after a year. What [#permalink] New post   28 Nov 2003, 23:54
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A person buys a share for $50 and sells it for $52 after a year. What is the total profit made by him from the share?

(1) A company pays annual dividend
(2) The rate of dividend is 25%

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C
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Re: A person buys a share for $50 and sells it for $52 after a year. What [#permalink] New post   29 Nov 2003, 00:06
4128851 wrote:
A person buys a share for $ 50 and sells it for $ 52 after a year. What is the total profit made by him from the share?
(I) A company pays annual dividend
(II) The rate of dividend is 25%

The official answer is C.
Dont we have to take the face value of the share into consideration??

Pls explain ur answers??


You are correct that the you cannot get the answer to the question "as it is written".

In practice, the dividends for common stock are typicaly not quoted by X% per share, but rather in $$ per share simply because the face value of the stock is essentially meaningless once the stock is traded. The dividend could also have a %yield, but you would have to specify the exact date/time of that yield as it is calculated from the price at that instant. Since the dividend is typically set by the board and not subject to fluctuatation by some other metric, it is quotes almost universally in $ per share.
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Re: A person buys a share for $50 and sells it for $52 after a year. What [#permalink] New post   01 Dec 2003, 23:20
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The answer is C.

50 bucks is what he will earn the dividend on. Since it is 25% - he gets $12.50 in dividend.

Hence his total earnings are 2 + 12.5.



Reg. ur explaination that dividend is in $'s rather than %, I tend to disagree too. Its a practice to give dollar values, but essentially it is %.
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Re: A person buys a share for $50 and sells it for $52 after a year. What [#permalink] New post   01 Dec 2003, 23:40
My contention is that the dividend on a share depends on the face value of the share. The face value could be 1, 10 , 100 etc.
So the answer to this question cannot be found??

Pls correct me if i m wrong!!

Gaurav.
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Re: A person buys a share for $50 and sells it for $52 after a year. What [#permalink] New post   01 Dec 2003, 23:46
maverick_ucdc wrote:
The answer is C.

50 bucks is what he will earn the dividend on. Since it is 25% - he gets $12.50 in dividend.

Hence his total earnings are 2 + 12.5.



Reg. ur explaination that dividend is in $'s rather than %, I tend to disagree too. Its a practice to give dollar values, but essentially it is %.


Sorry. You are WRONG. Dividends are always announced in $ per share. This amount is constant regardless of share price (i.e., is a fixed amount) until the board of directors announces another change. Of course, at any given moment in time, you can calculate the dividend YIELD which is in percentage. This is NOT done backwards, i.e., the dividend paid is never dependent on the underlying stock price and paid as a percentage of it.
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Re: A person buys a share for $50 and sells it for $52 after a year. What [#permalink] New post   11 Mar 2007, 06:53
Hi,

Answer is C because statement II says that dividend is 25% but it doesnt state the period. It could be 6 monthly dividend @ 25% per 6 month, while statement I clarify that its annual dividend, hence answer is C, as you have to combine both.

regards,

Amardeep
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Re: A person buys a share for $50 and sells it for $52 after a year. What [#permalink] New post   11 Mar 2007, 22:39
Amardeep Sharma wrote:
Hi,

Answer is C because statement II says that dividend is 25% but it doesnt state the period. It could be 6 monthly dividend @ 25% per 6 month, while statement I clarify that its annual dividend, hence answer is C, as you have to combine both.

regards,

Amardeep


I think..Ppetkov has a valid point here..

Annual dividend is 25%. Agreed. But 25% of what? $50 need not be the basis for calculation. Dividend is calculated on initial offer price. $50 need not be that price. Hence, E can be the answer.
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Re: A person buys a share for $50 and sells it for $52 after a year. What [#permalink] New post   11 Mar 2007, 22:48
yes, technically dividends are given on face value rather than market price of the share.... you have the valid point, but it looks out of scope of the GMAT question... I dont know how to treat it... can someone throw light on this?

regards,

Amardeep
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Re: A person buys a share for $50 and sells it for $52 after a year. What [#permalink] New post   12 Mar 2007, 11:46
All I know is I would love to have a share that pays a 25 percent dividend with 4 percent annual capital gains...forget about the answer!
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Re: A person buys a share for $50 and sells it for $52 after a year. What [#permalink] New post   12 Mar 2007, 13:15
heh, it probably depends on your tax status, my friend.
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Re: A person buys a share for $50 and sells it for $52 after a year. What [#permalink] New post   18 Oct 2007, 23:48
the answer is (E)

Selling price = 52
Dividend paid = x
Cost = 50


52+x-50 = Profit

statement does not state the dividend amonut and statement 2 does not tell you the rate per share .

this is true even if you combine both.

this is not so good of a question.

:)
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Re: A person buys a share for $50 and sells it for $52 after a year. What [#permalink] New post   19 Oct 2007, 00:32
IrinaOK wrote:
A person buys a share for $50 and sells it for $52 after a year. What is the total profit made by him from the share?

(I) A company pays annual dividend
(II) The rate of dividend is 25%


I agree with killer that the question is pretty vauge since it tells nothing about taxes and brokarage fees. taxes and brokarage fees are also part of share investment. therefore, it is E..

however we can identify the DPS rate, which equal to dividend rate (also called dividend yeild) times purchase price.

so E should not be a wrong answer.
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Re: A person buys a share for $50 and sells it for $52 after a year. What [#permalink] New post   19 Oct 2007, 00:49
Himalayan wrote:
IrinaOK wrote:
A person buys a share for $50 and sells it for $52 after a year. What is the total profit made by him from the share?

(I) A company pays annual dividend
(II) The rate of dividend is 25%


I agree with killer that the question is pretty vauge since it tells nothing about taxes and brokarage fees. taxes and brokarage fees are also part of share investment. therefore, it is E..

however we can identify the DPS rate, which equal to dividend rate (also called dividend yeild) times purchase price.

so E should not be a wrong answer.


I'm not aware of any company that pays dividend on the purchase price of a stock. This is literally impossible for the company to calculate. the dividend payed is usualy expressed as DPS in currancy terms (i.e 20 cent per share) and then calculated as DPS/PPS as a percent.

:)
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Re: A person buys a share for $50 and sells it for $52 after a year. What [#permalink] New post   10 Jan 2021, 09:39
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Re: A person buys a share for $50 and sells it for $52 after a year. What [#permalink]
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