Homework Answers
a. The nominal annual rate of return is computed as shown below:
= Annual dividend / Current price
= ( $ 3 x 4 quarters ) / $ 123
= 9.756097561 or 9.76% Approximately
b. The effective annual rate of return is computed as shown below:
= ( 1 + nominal annual rate of return / 4 )4 - 1
= ( 1 + 0.09756097561 / 4 )4 - 1
= 10.12% Approximately
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