Question

Do not answer using a percent sign, a dollar sign or with a number containing commas. For the questions involving rates, you can answer as a percent (for example 10) or as a decimal (for example 0.1).

1.1

Suppose you purchased 100 shares of stock for $40 on January 1, 2003 and sold the share of stock for $100 on December 31, 2012. If the stock paid no dividends what is your holding period return?

1.2

Suppose you purchased 100 shares of stock for $40 on January 1, 2003 and sold the share of stock for $100 on December 31, 2012. If the stock paid no dividends what your average yearly growth rate?

1.3

Assume you purchased a share of stock for $80 on January 1, 2008 and sold the share of stock for $30 on December 31, 2012. If the stock paid no dividends what is your holding period return?

Answer 1

Suppose you purchased 100 shares of stock for $40 on January 1, 2003 and sold the share of stock for $100 on December 31, 2012. If the stock paid no dividends what is your holding period return?

Holding period return = (sale Price - Purchase price) / Purchase Price

Holding period return = (100 - 40) / 40

Holding period return = 60 / 40

Holding period return = 150.00%

1.2 Suppose you purchased 100 shares of stock for $40 on January 1, 2003 and sold the share of stock for $100 on December 31, 2012. If the stock paid no dividends what your average yearly growth rate?

Average yearly growth rate = (1 + Holding Period Return)^(1/years) - 1

Average yearly growth rate = (1 + 150%)^(1/10) - 1

Average yearly growth rate = 1.095958 - 1

Average yearly growth rate = 9.60%

1.3 Assume you purchased a share of stock for $80 on January 1, 2008 and sold the share of stock for $30 on December 31, 2012. If the stock paid no dividends what is your holding period return?

Holding period return = (sale Price - Purchase price) / Purchase Price

Holding period return = (30 - 80) / 80

Holding period return = -50 / 80

Holding period return = -62.50%

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