A married couple buys 280 shares of stock for a total investment of $8,722. They decide to sell all of their shares in the fund at the listing value shown below.
| Name of Fund | NAV | Offer Price |
| :----------- | :------ | :---------- |
| CEH Mid-Cap | $31.05 | $31.20 |
Determine if the couple makes a profit or loss, and how much per share.
a. loss of $0.05 per share
b. loss of $0.10 per share
c. profit of $0.05 per share
d. profit of $0.10 per share
Answer (2)
Calculate the total revenue: 280 × $31.20 = $8736 .
Calculate the cost per share: 280 $8722 = $31.15 .
Calculate the profit per share: $31.20 − $31.15 = $0.05 .
The couple made a profit of $0.05 per share.
Explanation
Understanding the Problem The couple bought 280 shares for a total of $8722. They sold the shares at the offer price of $31.20 per share. We need to determine the profit or loss per share.
Calculating Total Revenue First, we calculate the total revenue from selling the shares. This is the number of shares multiplied by the offer price per share: T o t a l R e v e n u e = N u mb er o f S ha res × O ff er P r i ce T o t a l R e v e n u e = 280 × $31.20 = $8736 So, the total revenue is $8736.
Calculating Cost Per Share Next, we calculate the cost per share, which is the total investment divided by the number of shares: C os t p er s ha re = N u mb er o f S ha res T o t a l I n v es t m e n t C os t p er s ha re = 280 $8722 = $31.15 Thus, the cost per share is $31.15.
Calculating Profit/Loss Per Share Now, we calculate the profit or loss per share by subtracting the cost per share from the offer price: P ro f i t / L oss p er s ha re = O ff er P r i ce − C os t p er s ha re P ro f i t / L oss p er s ha re = $31.20 − $31.15 = $0.05 Since the result is positive, the couple made a profit of $0.05 per share.
Conclusion The couple made a profit of $0.05 per share.
Examples
Understanding profit and loss per share is crucial in stock trading. For instance, if you invest in a company and want to evaluate your return, calculating the profit or loss per share helps you determine the profitability of your investment. This concept is also applicable in broader financial analysis, such as evaluating the performance of mutual funds or assessing the financial health of a company. By knowing the profit or loss per share, investors can make informed decisions about buying, selling, or holding stocks.
The couple made a profit of $0.05 per share by selling their stock. They sold their shares for $31.20 each and had initially purchased them for $31.15 each. Therefore, the correct answer is option c, profit of $0.05 per share.
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