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3. Today an investor buys a stock for $100. One year from today the stock pays a dividend of $5 and its market value is
3. Today an investor buys a stock for $100. One year from today the stock pays a dividend of $5 and its market value is $120. Two years from today the stock pays another $5 in dividends and its market value stands at $110. What is the return on the stock a. In year 1? b. in year 2? C. over the entire holding period? d. How can you combine returns in years 1 and 2 to get the holding period return (rn) over both years? i. 11 +r2 = rn ii. r1 * r2 = rn iii. (1 + r) + (1 + r) - 1 = rn iv. (1+r) *(1 + rz) 1 = rn
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