Question

You purchase 100 shares of USK Corporation for $41.71
per share. Assume the price goes up to $50.34 per share over the
next 12 months and you received a qualified dividend of $0.67 per
share. What would be your total return on your USK Corporation
investment? Assuming you continue to hold the stock, calculate your
after-tax return. How is your realized after tax return different
if you sell the stock? In both cases assume you are in the 25%
Federal marginal tax bracket and 15% long-term capital gains and
qualified dividends tax bracket and if there is no state income tax
on investment income.

your total rate of return on your USK Corporation investment is
__%

Answer #1

**Answer
:**

Here, we have

Stock price gain = 50.34 - 41.71 = $ 8.63

Dividend = $ 0.67

Total gain = $ 8.63 + $ 0.67 = $ 9.30

Total Rate of Return = 9.30 / 41.71

**Total Rate of Return = 22.30%**

There will be no taxes as i am not selling the share and realizing a profit. There are no taxes on unrealized profit. I will only need to pay taxes on the dividend i received.

Stock price gain = 50.34 - 41.71 = $ 8.63

After-tax dividend = $ 0.67 ( 1 - 0.15 ) = 0.5695

Total gain = $ 8.63 + $ 0.5695 = $ 9.1995

**Total After-tax Rate of Return** = 9.1995 /
41.71

**= 22.06%**

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