Question

Using the data in the table to the​ right, calculate the return for investing in the stock from January 1 to December 31. Prices are after the dividend has been paid.

Date Price Dividend     Jan 1 $32.28 − Feb 5 $29.48 $0.19 May 14 $31.55 $0.17 Aug 13 $33.47 $0.18 Nov 12 $37.81 $0.18 Dec 31 $42.48 −

Return for the entire period is

​(Round to two decimal​ places.)

Answer 1

January 01 to February 05:

Rate of Return, r1 = (Closing Price + Dividend - Opening Price) / Opening Price
Rate of Return, r1 = ($29.48 + $0.19 - $32.28) / $32.28
Rate of Return, r1 = -0.0809

February 05 to May 14:

Rate of Return, r2 = (Closing Price + Dividend - Opening Price) / Opening Price
Rate of Return, r2 = ($31.55 + $0.17 - $29.48) / $29.48
Rate of Return, r2 = 0.0760

May 14 to August 13:

Rate of Return, r3 = (Closing Price + Dividend - Opening Price) / Opening Price
Rate of Return, r3 = ($33.47 + $0.18 - $31.55) / $31.55
Rate of Return, r3 = 0.0666

November 12 to August 13:

Rate of Return, r4 = (Closing Price + Dividend - Opening Price) / Opening Price
Rate of Return, r4 = ($37.81 + $0.18 - $33.47) / $33.47
Rate of Return, r4 = 0.1350

December 31 to November 12:

Rate of Return, r5 = (Closing Price + Dividend - Opening Price) / Opening Price
Rate of Return, r5 = ($42.48 + $0.00 - $37.81) / $37.81
Rate of Return, r5 = 0.1235

Annual Rate of Return, r = [(1 + r1) * (1 + r2) * (1 + r3) * (1 + r4) * (1 + r5)] - 1
Annual Rate of Return, r = [(1 - 0.0809) * (1 + 0.0760) * (1 + 0.0666) * (1 + 0.1350) * (1 + 0.1235)] - 1
Annual Rate of Return, r = 1.3451 - 1
Annual Rate of Return, r = 0.3451 or 34.51%

Return for the entire period is 34.51%