Compute the total and annual returns on the described investment. Five years after buying 200 shares...

Question

Question

Compute the total and annual returns on the described investment.

Five years after buying 200 shares of XYZ stock for $40 per share, you sell the stock for $ 12,600.

The total return is ____%.

The annual return ___%.

Answer 1

Answer #1

The total return is = (Selling cost - Purchase price) / Purchase price

The total return is = [$12,600 - (200 * $40)] / (200 * $40)

The total return is = $4,600 / $8,000

The total return is = 0.575 or 57.5%

The annual return = ($12,600 / $8,000)^(1/5) - 1

The annual return = 0.0951 or 9.51%

Answer 2

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