Details

Jan purchased 100 shares of Peach Computer stock for $18 per share, plus a $45 brokerage commission. Every 6 months she received a dividend from Peach of 50 cents per share. At the end of 2 years, just after receiving the fourth dividend, she sold the stock for $23 per share and paid a $58 brokerage commission from the proceeds.What annual rate of return did she receive on her investment? Solution: 1. NPW=PW of Benefits - PW of Costs=0 o Number of terms n= o PW of Benefits = (P/A,i*, n) + (P/F,i*,n); o PW of Costs= 2. Find IRR through interpolation o Try i* = 7%, NPW= o Try i* = 8%, NPW= Through interpolation, ROR= % 3. Other Calculations: o Nominal rate r= %; o Effective rate in= %