One year ago, Peyton purchased 3,600 shares of Broncos stock for $101,124. Today, he sold those shares for $26.60 a share. What is the total return on this investment if the dividend yield is 1.9 percent?

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BlackTom AI · Accepted Answer

Question restatement: One year ago, Peyton purchased 3,600 shares for a total of 101,124. Today, he sold the shares at 26.60 each. The problem asks for the total return on the investment, given a dividend yield of 1.9%. Options to evaluate: -3.98 percent, -2.29 percent, 1.10 percent, -3.40 percent.

Step-by-step analysis of each option:

Option 1: -3.98 percent
- To check this, compute the total return as (ending value + dividends - cost). Ending value from sale = 3,600 × 26.60 = 95,760. Dividends = 1.9% of the initial cost 101,124 ≈ 1,921.36. Total ending value including dividends = 95,760 + 1,921.36 ≈ 97,681.36. Subtract the initial cost 101,124 to get net return ≈ -3,442.64. Divide by the initial cost to get return ≈ -3.41%. This rounds to -3.41%, not -3.98%, so this option is not correct.

Option 2: -2.29 percent
- Using the same math: net return ≈ -3,442.64. Percentage return ≈ (-3,442.64 / 101,124) ≈ -3.41%. This is far from -2.29%, so this option is incorrect.

Option 3: 1.10 percent
- A positive return would require the ending value plus dividends to exceed the cost by about 1.10%. Given the sale value is 95,760 and dividends about 1,921, the total recovered is ≈ 97,681.36, which is still below the initial 101,124 by about 3,442.64. Therefore the return is negative, not positive, making this option incorrect.

Option 4: -3.40 percent
- This matches the calculated return. Net loss ≈ 3,442.64 on an investment of 101,124 yields roughly -3.40%. The calculation steps align with standard total return calculations: total return = (sale proceeds + dividends) − cost, then divide by cost to express as a percentage. The numbers: sale 95,760 + dividends ≈ 1,921.36 = 97,681.36; 97,681.36 − 101,124 ≈ −3,442.64; (−3,442.64 / 101,124) ≈ −0.0340 = −3.40%.

Summary: By performing the total return calculation with sale proceeds, dividends, and initial cost, option 4 yields the correct approximate percentage return of −3.40%. The other options either overstate or reverse the sign of the return based on incorrect arithmetic or misinterpretation of dividends relative to cost.

FIN 220 01 Final Exam _ Fall 2025

One year ago, Peyton purchased 3,600 shares of Broncos stock for $101,124. Today, he sold those shares for $26.60 a share. What is the total return on this investment if the dividend yield is 1.9 percent?

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