Answer to Question #237641 in Economics of Enterprise for Ara

Question

Abby purchased 100 shares of her dad's favorite stock for $25.80 per share exactly 1 year ago, commission free. She sold it today for a total amount of $2865. She plans to invest the enrire amount

Answer 1

Principal is the original amount in the beginning of the investment. Interest is the percentage earned or accrues over the interest time period. Interest is the difference between amount accrues and principal.

Abby invested a total amount of $2,580 ($25.80*100).

The present value per share is currently $28.65 ($2865/100)

Return on shares earned by the person is;

Return={(28.65-25.80)/25.80*100)

Return = 11.05%

If Abby decides to reinvest the amount of $2,865 and must pay commission of $50 on it.

The total amount to reinvest is $2,915 ($2,865+50)

The total amount Abby receives after 1 year is $2,915(1+11.05%)

Total amount Abby receives = $3,237.1075