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You purchase 100 shares of stock for $40 a share. The stock pays a $2 per share dividend at year-end. a. What is the rate

You purchase 100 shares of stock for $40 a share. The stock pays a $2 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) $38; (ii) $40; (iii) $46?

b.What is your real (inflation-adjusted) rate of return if the inflation rate is 3%?

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