Question

Question 5 (1 point) During a 3-months period, the price index increases from 120.8 to 121.5. During the same period, a stock increases in price for $100 to $110.5. What is the real rate of return for the stock for the 3 month period? Express your answer as a percentage, for example 3.18% should be entered as 3.18 without the percentage sign. Your Answer: Answer

Answer 1

Change in Price Index = (121.5 - 120.8)/120.8

Change in Price Index = 5.79%

Change in Stock Price = (110.5 - 100)/100

Change in Stock Price = 10.50%

Real Rate of Stock return = Change in Stock Price - Change in Price Index

Real Rate of Stock Return = 0.1050 - 0.0579

Real Rate of Stock Return = 4.71%