Question
On the advice of your uncle, you purchased 10 shares of a well-established U.S.-based corporate stock for $20.50 per share. After 1 quarter, you received
On the advice of your uncle, you purchased 10 shares of a well-established U.S.-based corporate stock for $20.50 per share. After 1 quarter, you received $0.25 per share dividends each quarter for 2 years. At that point, the stock price had gone down in a short-term recession, so you purchased 10 more shares at $14.00 per share. The stock continued to pay 25 per share on all 20 shares. After 3 years (12 quarters) you decided to sell the stock since it had increased in market value to $22.00 per share. Make the following assumptions: (a) no commissions for the purchase or sale of the stock, (b) no government taxes on the dividends, and (c) quarterly compounding of the rate of return. Did you realize the anticipated 7% per year that the stock market historically returns?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
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