An investor had invested in 50 shares of firm Z at the beginning of the year, when the stock price was $56 per share. On September 18th, the stock underwent a
3-for-2 split. At year-end, the stock price stood at $38. The investor realized a return of 17% during the year. His total dividend income during the year was:
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A. B. C. D.C
When the stock split, the investor was left with 50 * 3 / 2 = 75 shares. Hence, the year-end portfolio value equaled 75 * 38 = $2,850. The original amount invested was equal to 50 * 56 = $2,800. Since the investor realized a return of 17%, his total value inclusive of dividends at year-end was 2,800 * 1.17 = $3,276.
Therefore, the dividend income during the year was 3,276 - 2,850 = $426.