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Rama09 [41]
2 years ago
6

Suppose you buy some stock in the Alpha Corporation at a price of $45.95 per share. 410 days later you sell the stock for $48.27

. During this period you received a per share dividend of $1.20. What is your annualized return on this investment
Business
1 answer:
kondaur [170]2 years ago
8 0

Answer: 6.79%

Explanation:

The holding period return is:

= (Current price - Cost price + Dividend) / Cost price

= (48.27 - 45.95 + 1.20) / 45.95

= 7.66%

The annualized return is:

= ( ( 1 + holding period return) ^ number of days in a year/ number of days stock was held - 1)

= ( ( 1 + 7.66%) ³⁶⁵ / ⁴¹⁰ - 1)

= 6.79%

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If one is thinking about investing in a  liquid asset, surely is because it will need the cash in the short run. On the contrary, we could invest in other financial instruments less liquid (typically those who offer higher yields and have  longer terms), because we are not going to need the money for the moment, and we want to take advantage of that to get a higher yields.

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3 years ago
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2 years ago
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Answer:

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