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John Reardon purchased 100 shares of Tomco Corporation in December? 2016, at a total cost of $1,745
John Reardon purchased 100 shares of Tomco Corporation in December? 2016, at a total cost of $1,745. He held the shares for 15 months and then sold? them, netting $2,515. During the period he held the? stock, the company paid him $3.16 per share in cash dividends. How? much, if? any, was the capital gain realized upon the sale of? stock? Calculate? John's pretax HPR.
John's capital gain? (or loss) is ?$___. ?(Round to the nearest? dollar.)
The pretax HPR is ___ ?%. (Round to two decimal? places.)
Expert Solution
Computation of the capital gain or loss:-
Capital gain = Sales price - Purchase price
= $2,515 - $1,745
= $770
Computation of the pretax holding period return (HPR):-
HPR = (Sales price + Dividend - Purchase price) / Purchase price
= ($2,515 + (100 * $3.16) - $1,745) / $1,745
= ($2,515 + $316 - $1,745) / $1,745
= $1,086 / $1,745
= 62.23%
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