Steven purchased 1000 shares of a certain stock for $25,900 (including commissions). He sold the shares 2 years later and received $33,100 after deducting commissions. Find the effective annual rate of return on his investment over the 2-year period. (Round your answer to two decimal places.)

Steven purchased 1000 shares of a certain stock for $25,900 (including commissions). He sold the shares 2 years later and received $33,100 after deducting commissions. Find the effective annual rate of return on his investment over the 2-year period. (Round your answer to two decimal places.)

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter11: Property Dispositions

Section: Chapter Questions

Problem 55P

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Concept explainers

Capital Gain

Any capital asset when sold can give the seller a higher or lower price from its purchase price leading to a capital gain or capital loss. The time period of holding an asset is decided based on if it is a long term or short-term capital gain. On that basis, the rate of taxation is decided if it is 20%, 15% or according to the tax brackets. The rate of taxation differs in the case of equity or debt, whether long or short term. The capital gain can be adjusted from capital loss to arrive at a net capital gain. The amount of gains and the exemption has to be reported in the tax return filed in the financial year in which the asset was transferred. The tax return can be filed quarterly, monthly, semi-annually or annually.

Question

Definition Definition Percentage gain or loss from a specific investment over time. The rate of return is the difference between the closing and initial values of an investment divided by the initial value of the investment. The closing value includes any intermediate cash flows such as dividends or interest amounts.

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