Question

You bought a stock six months ago for $74.82 per share. The stock paid no dividends. The current share price is $77.59. What is the APR and EAR of your investment? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

Answer 1

Answer and Explanation:

The computation is shown below;

Percentage returns is

= (End value - Beginning value) ÷ Beginning value

= ($77.59 - $74.82) ÷ $74.82

= 3.70%

Now

APR is

= 3.70 × 2

= 7.40%

As the given months is six but we have to compute for 12 months that why we multiplied it by 2

And,

EAR = (1 + APR ÷ m)^m - 1

where

m = compounding periods

So,

= (1 + 0.074 ÷ 2)^2 - 1

=7.54%