If 2,500 Shares of Stock Are Purchased for $90 Per

question 78

Multiple Choice

If 2,500 shares of stock are purchased for $90 per share and are sold one year later for $82 per share, what is the net gain or loss on sale? (Assume that there are no transaction costs.)

• A) $20,000 gain
• B) $20,000 loss
• C) $2,500 gain
• D) $2,500 loss

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Definitions:

Cash Payback Period

The duration of time it takes for an investment to generate enough cash flow to recover its initial cost.

Net Income

The total earnings of a company after all expenses and taxes have been deducted from revenues, indicating profitability.

Straight-Line Rate

A method of calculating depreciation by dividing the difference between an asset's cost and its salvage value by the number of years it is expected to be used.

Annual Rate

The interest rate or growth rate over a period of one year, used for comparing investment returns or loan costs.