Miguel paid a total of $12,000 for stock that was $8 per share. If he sold all his shares for $15,000, how much profit on each share did he make?
A. $2
B. $8
C. $10
D. $12
Answer (2)
Calculate the number of shares Miguel bought: $8 $12 , 000 = 1500 .
Calculate the total profit: $15 , 000 − $12 , 000 = $3 , 000 .
Calculate the profit per share: 1500 $3 , 000 = $2 .
Miguel made a profit of $2 on each share.
Explanation
Calculating the Number of Shares Miguel initially invested $12,000 in stock with each share valued at $8. To determine the number of shares purchased, we divide the total investment by the price per share.
Shares Calculation The number of shares Miguel bought is calculated as follows: Number of shares = Price per share Total investment = $8 $12 , 000 = 1500 Miquel bought 1500 shares.
Calculating Total Profit Miguel sold all his shares for $15,000. To find the total profit, we subtract the initial investment from the total sales revenue.
Total Profit Calculation The total profit is calculated as follows: Total profit = Total sales revenue − Initial investment = $15 , 000 − $12 , 000 = $3 , 000 Miguel's total profit was $3,000.
Calculating Profit Per Share To determine the profit per share, we divide the total profit by the number of shares.
Profit Per Share Calculation The profit per share is calculated as follows: Profit per share = Number of shares Total profit = 1500 $3 , 000 = $2 Therefore, Miguel made a profit of $2 on each share.
Final Answer The profit Miguel made on each share is $2.
Examples
Understanding profit per share is crucial in stock trading. For instance, if you invest in a company and want to evaluate the return on your investment, calculating profit per share helps. Suppose you bought 500 shares of a company at $10 per share, totaling $5,000. If you later sell them for $12 per share, totaling $6,000, your profit is $1,000. The profit per share is $1,000 / 500 = $2, indicating how much you earned for each share you owned.
Miguel bought 1500 shares of stock at $8 each, totaling $12,000. He sold them for $15,000, making a total profit of $3,000. Therefore, the profit per share is $2, which is option A.
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