Problem 5

As part of the management recruitment process, the board of Google, Inc. (symbol: GOOG) has asked you to make a presentation to the firms shareholders on the performance of Google stock in March 2021.

a) Please find the closing prices of Google stock on the last trading days of February 2021 and January 2021 (i.e., the adjusted closing prices of Google from Yahoo!Finance on February 26,

2 2021 and January 29, 2021, respectively). What is the rate of return of Google for the month of

February 2021? 3

b) If Google continues to deliver the rate of monthly return you found in (a), how many months will it take since February 2021 for the stock price to reach $3,000? Assume that you start with the closing price on February 26, 2021 and that your returns are compounded monthly.

c) Convinced by the growth potential of the firm, you bought 50 shares of Google at the closing price on February 26, 2021 as part of your savings plan. You are planning to sell your shares in exactly two years from the time of purchase. You also plan to use all proceeds (i.e., the total amount received from selling your shares) for a down payment on a new home in the city where you will move after graduating from UM. Assuming that Google will continue to generate the same monthly return as in (a) and that your down payment will be 20% of the home price, what is the price of the home that you will be able to afford after you sell your shares?