John bought stock valued at ($ 10,000). He received a cash dividend of ($ 300) in year

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John bought stock valued at \(\$ 10,000\). He received a cash dividend of \(\$ 300\) in year \(1, \$ 350\) in year 2 , and \(\$ 400\) in year 3. The cash dividends were not reinvested. At the end of year 3, John sold the stock for \(\$ 12,000\). If John didn't invest in stock, he would have invested in bonds that had an \(8 \%\) return.

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A. What was the rate of return on John's stock?
B. Assuming the stock and bonds had equal risk, did John make the right decision to invest in the stock?

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Managerial Accounting Information For Decisions

ISBN: 9780324222432

4th Edition

Authors: Thomas L. Albright , Robert W. Ingram, John S. Hill

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