Question 4 (10 marks)

The stock price of the AYAX Company in the last five years were $38, $45, $42, $50, $48 and $48 (at time -5,-4,-3,-2,-1,0 respectively). The company paid dividends of $1.20 per share per year during those 5 years. The rate of inflation was 2% per year in those five years.

Calculate: -

1. The rate of return for each of the five years. (3 marks)
2. The real rate of return for each of the five years. (3 marks)
3. The geometric mean rate of return for the five years. (2 marks)
4. The geometric mean real rate of return for the five years. (2 marks)