Question

The following table contains prices and dividends for a stock. All prices are after the dividend has been paid​ (ex-dividend). If you bought the stock on January 1 and sold it on December​ 31, what is your realized​ return?  ​Hint: Make sure to round all intermediate calculations to at least five decimal places.

	Price	Dividend
Jan 1	10.04
Mar 31	11.04	0.17
Jun 30	10.54	0.17
Sep 30	11.14	0.17
Dec 31	11.04	0.17

Your realized return is

nothing​%.

​(Round to one decimal​ place.)

Answer 1

January 1 to March 31:

Rate of Return, r1 = (Closing Price + Dividend - Opening Price) / Opening Price
Rate of Return, r1 = ($11.04 + $0.17 - $10.04) / $10.04
Rate of Return, r1 = 0.11653

March 31 to June 30:

Rate of Return, r2 = (Closing Price + Dividend - Opening Price) / Opening Price
Rate of Return, r2 = ($10.54 + $0.17 - $11.04) / $11.04
Rate of Return, r2 = -0.02989

June 30 to September 30:

Rate of Return, r3 = (Closing Price + Dividend - Opening Price) / Opening Price
Rate of Return, r3 = ($11.14 + $0.17 - $10.54) / $10.54
Rate of Return, r3 = 0.07306

September 30 to December 31:

Rate of Return, r4 = (Closing Price + Dividend - Opening Price) / Opening Price
Rate of Return, r4 = ($11.04 + $0.17 - $11.14) / $11.14
Rate of Return, r4 = 0.00628

Realized Return = [(1 + r1) * (1 + r2) * (1 + r3) * (1 + r4)] - 1
Realized Return = [(1 + 0.11653) * (1 - 0.02989) * (1 + 0.07306) * (1 + 0.00628)] - 1
Realized Return = 1.170 - 1
Realized Return = 0.170 or 17.0%