Question

If you bought a stock for $53 dollars and could sell it 16 years later for three times what you originally paid. What was your return on owning this stock?

PLEASE SHOW ME EXACTLY HOW TO DO THE PROBLEM!!!! I INSERTED A PICTURE FOR AN EXAMPLE!

Future Value after 9 years is calculated using EXCEL FUNCTION FV(rate, nper,pmt, pv,type) where rate-1.5%; nper-9; pmt-o; pe-3520000; type=0; Here, value for pv is negative as it denotes cash inflows; type as interest is compounded at the end of each period only. C D E F G H I J K 1.5% $0 1 Periodic growth rate, RATE 2 of periods to maturity, NPER 3 Priodic deposits, PMT 4 Lumsum deposit today, PV 5 Interest compounding type, TYPE 6 Future Value after 9 years $3,520,000 O O if compounded at the end of each year; 1 if compounded at the beginning of each year -FV(B1,B2,B3, B4,B5) (Ref: NOTE]

Answer 1

Present Value = $53

Future Value = 3(53) = $159

Time Period = 16 years

Using TVM Calculation,

I = [PV = -53, FV = 159, PMT = 0, N = 16] (PMT = 0, as there is no payment in between)

I = 0.0711

So,

Return Rate = 7.11%

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