Question

B. Returns and Capital Gains 1. Anci wants to determine whether her investments have generated a capital gain over the past year. Investment Basis Commission Paid to Purchase Commission Paid to Sell Current Price Acme Co. $2,000 $50 $50 $2,200 Lemonade Inc. 2,000 1000 2,000 Pencil Corp. 1,500 50 50 2,000 1.a. Using the information above, calculate the gain or loss for each investment individually. Work: 1.b. Using the information above, calculate the total capital gain or loss for her total portfolio of assets (all combined). Work: 1.c. Using the information above, calculate the percentage gain or loss on each investment individually. Work:

Answer 1

Solution:

In order to find the profit or loss we need to take into the consideration of commission paid when we are purchasing or selling the stock .

Gain/ loss= current price - commission paid to purchase - commission paid to sell - investment

1. A)

Gain or loss in these given stocks are as follows

1. Acne company :Gain = 2,200 - 50 -50 -2000 = 100

2. Lemonade Inc Loss = 2,000 -100-0 - 2000 = -100

3. Pencil corp: Gain = 2000 - 50 -50 -1500 = 400

1. B ) Total capital gain will be sum of all the gain from these Investment. Total gain = 100 -100 + 400 = 400

1. C )

Percentage gain or loss can be calculated by using the formula

Gain (loss)% = gain (loss)/ (Investment+ commission paid to purchase )

Acne company : Gain % = 100/2050 = 4.87%

Lemonade Inc: Loss % = -100/2100 = -4.76%

Pencil corp: Gain % = 400/1550 = 25.81%