Author Question: Nico bought 100 shares of a company's stock for 22.00 per share on January 1, 2013. He received a ... (Read 124 times)

leo leo · **on:** Jul 10, 2018

Nico bought 100 shares of a company's stock for 22.00 per share on January 1, 2013. He received a dividend of 2.00 per share at the end of 2013 and 3.00 per share at the end of 2014.

At the end of 2015, Nico collected a dividend of 4.00 per share and sold his stock for 18.00 per share. What was Nico's realized holding period return? What was Nico's compound annual rate of return? Explain the difference?

Question 2

________ is the typical title of the corporate executive charged with determining the best repayment structure for borrowed funds to ensure timely repayment and sufficient cash for daily operations.

A) Chief Executive Officer (CEO)
B) Chief Financial Officer (CFO)
C) Chairman
D) Chief Operating Officer (COO)

smrtceo · **Reply #1 on:** Jul 10, 2018

Answer to Question 1

Realized return = = 59.09
Compound Return:
22 = 2/ + 3/ + (4 + 18)/
Solve for r either with a calculator or through trial and error. The calculator is approximately 7.8.
The reason the realized holding period return is so much larger than the compound rate of return is that the realized return does not account for the time value of money.

Answer to Question 2

Answer: B