Question

You purchased Enron stock at a price of $36 per share. Its price was $24 after six months and $18 at the end of the year. (a) What is the realized return over the first six months in percent? (Round your answer to two decimal places.) (b) What is the realized return over the next six months in percent? (c) What is the realized return over the entire year in percent?

Answer 1

a) Realized return over the initial 6 months = (Final price at the end of 6months-Initial price at the start)/Initial price at the start

= (24-36)/36

= -12/36

= -1/3

= -33.33% Answer

b)Realized return over the next 6 months = (Final price at the end of the year -Initial price after completion of 6 months)/Initial price after completion of 6 months

= (18-24)/24

= -6/24

= -1/4

= -25% Answer

c) Realized return over the year = (Final price at the year end - Initial price at the start of year)/Initial price at the start of year

= (18 -36)/36

= -18/36

= -1/2

= -50% Answer

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