Suppose that 10 years ago, you purchased shares in a certain corporation's stock. Between then and now, there was a 3:1 split and a 5:1 split. If shares today are 71% cheaper than they were 10 years ago, what would be your rate of return if you sold your shares today? Round your answer to the nearest tenth of a percent.
For this question, we need to first calculate the no of shares now available for sale in year 10. | |||
And also, we need to calculate the share price after year 10. | |||
Assumed share price at T0= | $ 100.00 | ||
Share purchased at T0= | 1.00 | ||
Initial investment | $ 100.00 | ||
Share price at T10= | 100*(1-71%) | ||
Share price at T10= | $ 29.00 | ||
Share purchased at T0= | 1.00 | ||
First split= | 3:1 | ||
share available after 1st split= | 3.00 | ||
2nd split= | 5:1 | ||
share available after 2nd split= | 5*3 | ||
share available after 2nd split= | 15.00 | ||
Share selling price at T10= | Share for sale * Share price at T10 | ||
Share selling price at T10= | 15*29 | ||
Share selling price at T10= | $ 435.00 | ||
Rate of return= | (Share selling price - Initial investment)/Initial investment | ||
Rate of return= | (435-100)/100 | ||
Rate of return= | 335.00% | ||
The annualized rate of return= | ((Share selling price at T10/Initial investment)^(1/time))-1) | ||
The annualized rate of return= | ((435/100)^(1/10))-1) | ||
The annualized rate of return= | 15.84% | ||
Suppose that 10 years ago, you purchased shares in a certain corporation's stock. Between then and...
10 years ago, you purchased shares of stock in a corporation. Between then and now, the stock had a 3:1 split, and the price per share increased by 21%, what would be the rate of return on your investment if you sold your shares today? Round your answer to the nearest tenth of a percent.
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