Question

B. Investing Fundamentals 1.a Return on Stock. Mica purchased 1000 shares of stock for $28 per share. During the year, she received dividend checks amounting to $2,000. Mica recently sold the stock for $33 per share. What was Mica's percentage return on the stock (including both dividends and capital gains)? Work: 35 Rokkos Fall 2019 Problem Set 3 Answer Point Value Points Earned 36 1.b Capital Gains Tax. Mica is single and is in a 32% tax bracket. What amount of taxes will she pay on her capital gain (not including the dividends) if she held the stock for 9 1/2 months? Work: 38 1.c Capital GainsNax. How much would Mica pay on her capital gain (not including the dividend) for tax if she held the stock for more than one year, assuming she sold it for the same amount? Work: 39

Answer 1

Calculation of Mica's Percentage return on stock (including both dividends and capital gains)

Cost at which shares were purchased is $28,000 (1,000 shares * $28) OR $28 per share

Dividend received is $2,000 which is $2 per share ($2,000 / 1,000 shares)

Capital Gains per share $5 per share ($33 - $28)

Total return per share $7 ($2 + $5)

Percentage return on stock = 25% [($7 / $28) * 100]

If Mica holds share for 9^1/2 months then tax payable by her on capital gain will be $1,600 (32% of $5,000)

If Mica holds share for more than one month then tax payable by her on capital gain will be $800 (16% of $5,000)