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leva [86]
3 years ago
15

Last year, you purchased a stock at a price of $78.00 a share. Over the course of the year, you received $2.70 per share in divi

dends and inflation averaged 3.2 percent. Today, you sold your shares for $82.20 a share. What is your approximate real rate of return on this investment?
Business
1 answer:
lutik1710 [3]3 years ago
6 0

Answer:

5.65%

Explanation:

Last year a stock of $78.00 was bought

During the period of one year $2.70 was received in dividend and inflation averaged 3.2%

Today the shares was sold for $82.20

The first step is to calculate the nominal return

= ($82.20-$78.00+$2.70)/$78.00

= 6.9/78

= 0.0885×100

= 8.85%

Therefore, the approximate real rate can be calculated as follows

= 8.85%-3.2%

= 5.65%

Hence the approximate real rate of return on this investment is 5.65%

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