Question
Determine optimal investment. At the beginning of the year, your client has the following investment choices. Ignoring tax, determine the return for each investment and
Determine optimal investment. At the beginning of the year, your client has the following investment choices. Ignoring tax, determine the return for each investment and advise your client of the benefit and risk of each option assuming they are risk averse.
a) 100 Shares in a publicly traded company that cost a total of $2,600 and pays an annual dividend of $0.50 per share. The investment value is not anticipated to change during the year. What is the return on investment before tax ?
b) Bonds of a publicly traded company that cost a total of $2,600 and pay annual interest of 1.6%. The investment value is not anticipated to change during the year. What is the bond annual return ?
c) A one-year GIC at a chartered bank that costs $2,600 and pays annual interest of 1.5%. What is the annual return ?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
a 100 Shares in a publicly traded company Initial investment cost 2600 Annual dividend per share 050 ...Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started