Question

Jerry purchased a share of Toyota Motor Group on 23rd September 2015 for 6,453 Japanese Yen. Its closing price on 23rd September 2020 was 7,081 Japanese Yen. What was the annual compounded rate of return on this share that he would have realised on that date?

Group of answer choices

1.754%

1.875%

1.685%

None of the options

1.559%

n relation to the agency problem in corporations, the ‘principals’ are the ____________________ and the ‘agents’ are the _______________________.

Group of answer choices

Shareholders; managers

None of the options

Managers; shareholders

Board of Directors; shareholders

Board of Directors; managers

Answer 1

So, the annual compounded rate of return is :

=( Ending value/ beginning value) ^ (1 / number of years) - 1 * 100

= ( 7081/6453) ^ (1/5) - 1 * 100

= (1.0973) ^0.2 - 1 * 100

= 1.875%

So, the correct option is optio B.

In an agency problem, the principals are the shareholders and the agents are the managers.

The managers need to act in the best interest of the shareholders.

So, the correct option is option A.