Problem 11-8 Real versus Nominal Returns (LO2)

You purchase 100 shares of stock for $50 a share. The stock pays a $4 per share dividend at year-end.

a. What is the rate of return on your investment if the end-of-year stock price is (i) $46; (ii) $50; (iii) $55? (Leave no cells blank - be certain to enter "0" wherever required. Enter your answers as a whole percent.)

b. What is your real (inflation-adjusted) rate of return if the inflation rate is 6%? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Negative amounts should be indicated by a minus sign.)

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