Calculate Return of Investment

Total Return

start value of investment

YE value of investment

Dividends

YE - Start + Dvi/Start = Total Return

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For example, if you bought a stock for $7,543 and it is now worth $8,876, you have an unrealized gain of $1,333. You also received dividends during this time of $350. What is the total return?

($8,876 - $7,543) + $350 / $7,543 = Total Return

$1,333 + $350 / $7,543 = Total Return

$1,683 / $7,543 = Total Return

0.2231 or 22.31% = Total Return

Simple Return (sold it)

Net Proceeds

Dividends

Cost Basis

Net proceeds + dividends/cost basis - 1

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Here's an example: Suppose you bought a stock for $3,000 and paid a $12 commission. Your cost basis is $3,012. You sell the stock for $4,000, and there is another $12 commission, so your net proceeds are $3,988. Dividends amounted to $126.

$3,988 + $126 / $3,012 – 1 = Simple Return

$4,114 / $3,012 – 1 = Simple Return

1.36 – 1 = Simple Return

0.36 or 36% = Simple Return

Compound Annual Growth Rate

show you the value of money in your investment over time.

CAGR = Ending value / Starting value)^(1 / # years) -1

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Jasmine Washington purchased $12,500 of common stock in Midwest Bank Inc. She recently sold the investment for $15,000 and received cash dividends of $2,500 during her holding period of four years. She paid a total of $250 in commissions. What is her CAGR?

Step 1: Calculate Total Return

$15,000 received upon sale + $2,500 cash dividends received = $17,500----------------------(divided by)----------------------$12,500 investment + $250 commissions = $12,750 cost basis

= 1.37 total return

Step 2: Calculate CAGR

1.37 (.25)= 1.08, or 8 percent CAGR

total return = simple return