surupab wrote:
An investor purchased 100 shares of stock X at 6 1/8 dollars per share and sold them all a year later at 24 dollars per share. If the investor paid a 2 percent brokerage fee on both the total purchase price and the total selling price, which of the following is closest to the investor's percent gain on this investment?
(A) 92%
(B) 240%
(C) 280%
(D) 300%
(E) 380%
Hi, this is pretty easy to solve.
Solution:1) Cost per share: $6(1/8) or $49/8 which equals $6.125.
Number of shares purchased: 100
Total cost on 100 shares (without the 2% brokerage): $6.125 * 100= $612.5
Total amount the investor spent on purchasing 100 shares: $612.5 + 2% of $612.5 = $612.5 + $12.25 =
$624.752) Sale price of per share: $24
Number of shares sold: 100
Total selling price (without the 2% brokerage): $24 * 100 = $2400
Total amount earned on sale of 100 shares: $2400 - 2% of $2400
(because we have to deduct the brokerage fee on sale, while add them in purchase of shares) = $2400 - $48 =
$2352To find the percent gain, we need to first find the difference of amount earned by the sale of shares & the purchase of shares.
(Total amount earned by sales) - (Total amount spent on purchase)$2352 - $624.75 =
$1727.25Now let's find the percent gain.
\([1727/625]\)*100 (use approximate values as the question is asking for approximate percent gain)
\([1727/25]*4\) (Since \((25)^2 = 625\); 25 * 4 = 100)
\([69.08/1]*4\) =
276.32%Since the question asks for approximate percent gain, we can round off 276.32% to 280%Option C