eBook

Problem 1-04

Compute the real rates of return for the following situations assuming that the inflation rate is 5 percent. Compute the real rates of return if the rate of inflation was 8 percent. Use a minus sign to enter negative values, if any. Do not round intermediate calculations. Round your answers to one decimal places.

On February 1, you bought 80 shares of stock in the Francesca Corporation for $29 a share and a year later you sold it for $34 a share. During the year, you received a cash dividend of $1.70 a share.

Real rate of return at 5%: %

Real rate of return at 8%: %

On August 15, you purchased 80 shares of stock in the Cara Cotton Company at $30 a share and a year later you sold it for $25 a share. During the year, you received dividends of $2.90 a share.

Real rate of return at 5%: %

Real rate of return at 8%: %

At the beginning of last year, you invested $1,800 in 60 shares of the Chang Corporation. During the year, Chang paid dividends of $5.00 per share. At the end of the year, you sold the 60 shares for $38 a share.

Real rate of return at 5%: %

Real rate of return at 8%: %

Pleal irate Lf teturn at stet Real rate ef ratien at sast Hewilnate af rehirm at thei Hesil rate of tefum at stil