Problem 16-02 You sold a stock for $60 that you purchased fifteen years earlier for $35....

Question

Question

Problem 16-02 You sold a stock for $60 that you purchased fifteen years earlier for $35. What was the holding period return a

Answer 1

Answer #1

Holding period return			=	(P1-P0)/P0	Where,
			=	(60-35)/35	P0	=	$ 35.00
			=	71%	P1	=	$ 60.00

Holding period return			=	((1+i)^n)-1	Where,
	71%		=	((1+i)^15)-1	i	=	Annual return
	171%		=	(1+i)^15	n	=	time
	171%	^(1/15)	=	1+i
	1.036586		=	1+i
	0.036586		=	i

Annualized compounded return				4%

Answer 2

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