You recently purchased a round lot (100 shares) of ABC stock that offered an attractive dividend. The stock cost $50 per share and offered an annualized dividend of $4.00 per share that is paid quarterly ($1.00 per share, per quarter). Assuming you reinvested your dividends when they were received each quarter into a mutual fund expected to provide a nominal 12% return compounded quarterly and then sold the stock for $75 per share at the end of the 5th year, calculate the overall growth rate of return on this 5-year investment. Round your cash flow calculations to the dollar.
You recently purchased a round lot (100 shares) of ABC stock that offered an attractive dividend. The stock cost $50 per share and offered an annualized dividend of $4.00 per share that is paid quarterly ($1.00 per share, per quarter). Assuming you reinvested your dividends when they were received each quarter into a mutual fund expected to provide a nominal 12% return compounded quarterly and then sold the stock for $75 per share at the end of the 5th year, calculate the overall growth rate of return on this 5-year investment. Round your cash flow calculations to the dollar.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:You recently purchased a round lot (100 shares) of ABC stock that offered an attractive
dividend. The stock cost $50 per share and offered an annualized dividend of $4.00 per share
that is paid quarterly ($1.00 per share, per quarter). Assuming you reinvested your dividends
when they were received each quarter into a mutual fund expected to provide a nominal 12%
return compounded quarterly and then sold the stock for $75 per share at the end of the 5th
year, calculate the overall growth rate of return on this 5-year investment. Round your cash
flow calculations to the dollar.
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