Share purchases/sales, brokerage and dividends | Year 11

01 / LEARN

Understand the idea.

Account for each cash flow

A share transaction has several cash flows. Buying uses number of shares times purchase price, plus purchase brokerage. Selling returns number of shares times selling price, minus sale brokerage. A per-share dividend is another receipt multiplied by the number held.

To find net profit, add all stated receipts and subtract all stated costs. A rise in price per share alone is not the investor's total profit, because the quantity held, dividends and both transaction charges also matter.

Interpret share measures

Dividend yield compares a specified annual dividend per share with a stated share price. Divide the dividend by that price and express the ratio as a percentage. It measures dividend income relative to price, without including any gain or loss from a price change.

Keep the measures separate: total profit is a dollar amount, while yield is a percentage. The examples use supplied hypothetical prices and dividends. Do not extend a stated dividend into later years or add a future price change that the problem has not specified.

02 / WORKED EXAMPLES

See the method in action.

EXAMPLE 01

Worked example

Buy 200 shares at AUD 8.40 each with AUD 20 brokerage. Later sell all at AUD 9.10 with AUD 20 brokerage and receive AUD 0.24 dividend per share. Find net profit.

Worked solution

1
Calculate the total purchase outlay.
$C = 200 (8.40) + 20 = AUD 1700$
Purchase brokerage adds to the amount paid for the shares.
2
Calculate the net sale proceeds.
$S = 200 (9.10) - 20 = AUD 1800$
Sale brokerage is deducted from the gross selling receipt.
3
Calculate the dividend received.
$D = 200 (0.24) = AUD 48$
Every one of the 200 held shares receives the stated dividend.
4
Subtract all costs from all receipts.
$profit = 1800 + 48 - 1700 = AUD 148.00$
Net profit includes both dividend income and the result of buying and selling after brokerage.

Answer

AUD 148.00

EXAMPLE 02

Worked example

A share costs AUD 12 and pays an annual dividend of AUD 0.54. Find dividend yield.

Worked solution

1
Identify the dividend and its reference price.
$d = AUD 0.54, p = AUD 12$
The annual dividend yield uses dividend per share divided by the stated share price.
2
Calculate the dividend-to-price ratio.
$\frac{d}{p} = \frac{0.54}{12} = 0.045$
Both monetary amounts are per share, so the ratio is unitless.
3
Express the annual dividend yield.
$Y = 0.045 \times 100 % = 4.5 %$
The result describes dividend income relative to price and includes no capital price change.

Answer

4.5%

03 / YOUR TURN

Try it yourself.

Check your understanding

Brokerage is AUD 15 on a purchase of 100 shares at AUD 6. What is total cost?

Show answer & reasoning

AUD 615.00

The shares themselves cost $100 (6) = AUD 600$ . Purchase brokerage is an additional cost, so the total outlay is $600 + 15 = AUD 615.00$ .

Keep practising

6 worksheet questions · 12 marks

Open worksheet Worked solutions

Read the questions online

Buy 80 shares at AUD 15.50 with AUD 18 brokerage. Find the cost.
2 marks
Sell 150 shares at AUD 7.20 with AUD 22 brokerage. Find net proceeds.
2 marks
Receive AUD 0.36 dividend on each of 250 shares. Find total income.
2 marks
Purchase cost was AUD 2040. Net sale proceeds are AUD 2160 and dividends AUD 65. Find profit.
2 marks
At AUD 18 per share, annual dividend is AUD 0.72. Find dividend yield.
2 marks
Buy 100 shares at AUD 10 with AUD 15 brokerage each way. With no dividend, what sale price per share breaks even?
2 marks

Read the worked solutions

Equivalent correct methods earn the corresponding marks. Include units where asked.

Buy 80 shares at AUD 15.50 with AUD 18 brokerage. Find the cost.
2 marks
$80 \times 15.50 + 18 = 1258$ .
AUD 1,258.00
Sell 150 shares at AUD 7.20 with AUD 22 brokerage. Find net proceeds.
2 marks
$150 \times 7.20 - 22 = 1058$ .
AUD 1,058.00
Receive AUD 0.36 dividend on each of 250 shares. Find total income.
2 marks
$250 \times 0.36 = 90$ .
AUD 90.00
Purchase cost was AUD 2040. Net sale proceeds are AUD 2160 and dividends AUD 65. Find profit.
2 marks
$2160 + 65 - 2040 = 185$ .
AUD 185.00
At AUD 18 per share, annual dividend is AUD 0.72. Find dividend yield.
2 marks
$\frac{0.72}{18} \times 100 = 4 %$ .
4%
Buy 100 shares at AUD 10 with AUD 15 brokerage each way. With no dividend, what sale price per share breaks even?
2 marks
$Cost = 1015$ .
$100 s - 15 = 1015$ ,so $100 s = 1030$ .
AUD 10.30 per share

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Curriculum reference & lesson scope

SACE Board of South Australia

Stage 1 General Mathematics: investing and borrowing. Supplied educational models cover interest, investment comparisons, shares and credit; they are not recommendations of real products or statements of personal tax liability.

Official curriculum source ↗

In this lesson

Understand the idea.

Account for each cash flow

Interpret share measures

See the method in action.

Worked example

Calculate the total purchase outlay.

Calculate the net sale proceeds.

Calculate the dividend received.

Subtract all costs from all receipts.

Worked example

Identify the dividend and its reference price.

Calculate the dividend-to-price ratio.

Express the annual dividend yield.

Try it yourself.

Check your understanding

Keep practising