Question

In: Finance

Given the following, how to calculate the total accumulated return time t = 0 on a...

Given the following, how to calculate the total accumulated return time t = 0 on a share, brought to time t = -3,4 i.e. incl. reinvestment in new shares from possible dividends?

Time Dividend Price pr share Realized return
-3,4 0 243
-3 9 234 0
-2,3 0 249 0,064102564
-2 9 255 0,060240964
-1,5 0 270 0,058823529
-1 5 248 -0,062962963
-0,4 0 273 0,100806452
0 8 267 0,007326007
Total return 0,228336553

Solutions

Expert Solution

Time Dividend Price per share New shares bought
A B C = A / B
-3,4 0 243                     -  
-3 9 234            0.0385
-2,3 0 249                     -  
-2 9 255            0.0353
-1,5 0 270                     -  
-1 5 248            0.0202
-0,4 0 273                     -  
0 8 267            0.0300
Total            0.1239

Making use of the dividends, an additional 0.1239 shares can be bought.

Investment to buy one share at the beginning = 243

Value of investment at the end = (1 + 0.1239) x 267 = 300.08

Hence, the total accumulated return time t = 0 on a share, brought to time t = -3,4 i.e. incl. reinvestment in new shares from possible dividends = 300.08 - 243 = $ 57.08 (in $ terms) or = 57.08 / 243 = 23.49% (in %age terms)


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