Ouestion Two

An investor bought 2000 shares of Unilever Ghana Limited on 1" January 2018 through an investment broker and instructed the broker to re-invest any dividends received in additional shares of Unilever. During the year, Unilever paid three dividends. The information on dividends and share prices at the time of dividend payments is indicated below:

Date

Price Per share in Cedis Dividend Per Share in Cedis

April

150

July

135

October

142

December

150

The investor calculated the return on his investment for the one year holding period and recorded 20.71%. He is not sure whether this is correct. You are required to:

Determine how the investor came by the 20.71% return(2 marks)

Explain the limitations in the calculation in (a)

(3 marks)

(c) Provide a correct calculation of the investor's return using

(i) The index method(10 marks)

(ii) The linking method

(10 marks)

(d) Show how much the investment is worth at the end of ecember and divide the investor's gain into dividend yield and capital gain in both absolute and percentage terms.(5 marks)