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Close Window Moving to the next question prevents changes to this answer Question 3 of 5 uestion 3 1 points Save Answer John purchased 100 shares of his favorite stocks for $24.50 per share exactly one year ago. He sold them for $2865 today. He plans to invest the full amount in a different stock, but must pay $75 commission fee. If John plans to sell the new stock one year from now and earn the same return, what must be the total amount he receives next year? Include the commission fee as part of the purchase price, but neglect any tax effects. Question 3 of 5 Moving to the next question prevents changes to this answer. Close Window

Explanation / Answer

3.

Initial value of investment = 100*24.5 = $2450

Value realized after 1 year = $2865

Return upon the investment = (2865-2450)/2450 = 16.94%

Total investment in the different stock = 2865 + 75 = $2940

Hence,

The value of stock after one year = 2940*(1+16.94%)

The value of stock after one year = $3438.04

So, $3438.04 should be received after 1 year from the different stock to get the equal return from the earlier investment.

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