What would your annual return be if you bought a stock for $5,000 that paid a $225 annual dividend and sold it for $9,500 after 7 years?

To determine the annual return on the stock investment, you need to calculate both the total returns from dividends and the appreciation of the stock value over the 7-year period.

Initially, you invested $5,000 in the stock. Over 7 years, the stock paid a total dividend of $225 each year. Therefore, the total dividends earned over this period would be:

Total Dividends = Annual Dividend × Number of Years Total Dividends = $225 × 7 = $1,575

Next, you need to calculate how much you received when you sold the stock. You sold it for $9,500 after 7 years. To find the total return from your investment, add the total dividends to the selling price of the stock:

Total Return = Sale Price + Total Dividends Total Return = $9,500 + $1,575 = $11,075

Now, we can evaluate the overall profit of the investment:

Total Profit = Total Return - Initial Investment Total Profit = $11,075 - $5,000 = $6,075

To find the annual return, we can use the compound annual growth rate (CAGR) formula, which is given by:

CAGR = (