Question

You purchase 100 shares of stock for $60 a share. The stock pays a $3 per share dividend at year-end. a. What is the rate of return on your investment if the end-of-year stock price is () $57; (i) $60; (ii) $66? (Leave no cells blank-be certain to enter "O" wherever required. Enter your answers as a whole percent.) Stock Price Rate of Return b, what is your real (inflation-adjusted) rate of return if the inflation rate is 4%? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Negative amounts should be indicated by a minus sign.) Stock Price Real Rate of Return 57

Answer 1

Calculating the return on your investment Rate of return on your investment Beginning price) Beginning price End of year pice + dmdend (57 +3-60)/60 0% Rate of return on your investment End of year price + (60+3-60)/60 dividend - Beginning price) / Beginning price 5% Rate of return on your investment End of year price + didend Begnng price) Beginnng pice (66+3-60)/60 15% Calculated the inflated adjusted inflation rate of 4% (1+nominal rate) (1tinflation rate) (1 +000)/(1+4%)-1 1 -4% Calculated the inflated adjusted inflation rate of 490 (1+nominal rate) (1tinflation rate) 1 190 Calculated the inflated adjusted inflation rate of 4% (1+nominal rate) (1tinflation rate) (1+1590)(1+490)-1 1 11%