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1. [12 points] The stock price of Rainbow Inc. and dividend history are as follows: An investor initially invests $100 at the beginning of year
1. [12 points] The stock price of Rainbow Inc. and dividend history are as follows: An investor initially invests $100 at the beginning of year 2010 when the stock of Rainbow Inc. is traded at $100 per share. He buys another two shares at the beginning of year 2011 , sells one share at the beginning of year 2012 . He collects dividends for all the shares he holds at the end of each year. He sells the remaining shares at the end of year 2012 (after collecting the dividend). (a) What is the annual holding period return for year 2010? What is the capital gain yield and dividend yield, respectively? (4 points) (b) Please record the cash flows of the investor at the following time stamp and calculate the dollar weighted annual return on the investment. (Note: you only need to put down the equation that you will use to solve for the dollar-weighted return, no calculation is need; you can ignore the time value of money between the end of previous year and the beginning of current year) (8 points)
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