dividend from Peach of 50 cents per share hare and paid a $58 brokerage commissi Solution: 1. NPW=PW of Benefits - PW of Costs o Number of terms n= o PW of Benefits = (P/A, O PW of Costs= 2. Find IRR through interpolation o Try i*=7%, NPW=
dividend from Peach of 50 cents per share hare and paid a $58 brokerage commissi Solution: 1. NPW=PW of Benefits - PW of Costs o Number of terms n= o PW of Benefits = (P/A, O PW of Costs= 2. Find IRR through interpolation o Try i*=7%, NPW=
Chapter4: Time Value Of Money
Section: Chapter Questions
Problem 28P
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Question
Transcribed Image Text:Jan purchased 100 shares of Peach Computer stock for $18 per share, plus a $45 brokerage commission. Every 6 months she received a
dividend from Peach of 50 cents per share. At the end of 2 years, just after receiving the fourth dividend, she sold the stock for $23 per
share and paid a $58 brokerage commission from the proceeds.What annual rate of return did she receive on her investment?
Solution:
1. NPW=PW of Benefits - PW of Costs=0
o Number of terms n=
o PW of Benefits =
(P/A,i*,n)+
(P/F,i*,n);
O PW of Costs=
2. Find IRR through interpolation
o Try i*=7%, NPW=
o Try i*=8%, NPW=
o Through interpolation, ROR=
%
3. Other Calculations:
o Nominal rate r=
%;
o Effective rate iz=
%.
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