You sold a stock for $70 that you purchased fourteen years earlier for $40, What was...

Question

Question

business finance

Answer 1

Answer #1

Holding Period Return = (Final Price - Initial Price)/Initial Price = ($70 - $40)/$40 = 75%

Annualized compound return calculation needs use of basic time value of money function, which is:

FV = PV * (1 + r)ⁿ

$70 = $40 * (1 + r)⁸

1.75 = (1 + r)⁸

(1 + r) = 1.0725

r = 7.25%

Answer 2

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