a. Andrea purchased 200 shares of stock for $45 per share. During the year, she

Question

a. Andrea purchased 200 shares of stock for $45 per share. During the year, she received dividend checks amounting to $180. Andrea recently sold the stock for $54 per share. What was Andrea's return on the stock?

b. Andrea is in a 25 percent tax bracket. What amount of taxes will she pay on her capital gain if she held the stock for less than a year?

c. How much would Andrea pay for tax if she held the stock for more than a year, assuming she sold it for the same amount? (Long term capital gain)

d. How much would Andrea save in taxes if she held the stock for more than a year, assuming she sold it for the same amount? (Savings)

a. Andrea purchased 200 shares of stock for $45 per share. During the year, she received dividend checks amounting to $180. Andrea recently sold the stock for $54 per share. What was Andrea's return on the stock?

b. Andrea is in a 25 percent tax bracket. What amount of taxes will she pay on her capital gain if she held the stock for less than a year?

c. How much would Andrea pay for tax if she held the stock for more than a year, assuming she sold it for the same amount? (Long term capital gain)

d. How much would Andrea save in taxes if she held the stock for more than a year, assuming she sold it for the same amount? (Savings)

Explanation / Answer

a) Return = 180 + (54 - 45) * 200 = 1980

b) Tax on CG = (54 - 45) * 200 * .25 = 450

c) Tax on CG = (54 - 45) * 200 * .15 = 270

d) Tax saving = 450 - 270 = 180

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