FIN440 - Financial Institutions and Markets

Q2. Suppose an investor buys 10 shares of stock priced at $12 and sells the stocks 4 months later for $15 after collecting a $1.24 dividend per share. a) What is the investor's pre-tax holding period return? (10 MARKS) b) What is the investor's pre-tax effective annual return? (10 MARKS) c) If dividend income is taxed at a 20% rate and capital gains are taxed at 14%, what is the investor's after-tax holding period return? (10 MARKS) d) If dividend income is taxed at a 20% rate and capital gains are taxed at 14%, what is the investor's after-tax effective annual return? (10 MARKS)