Question

Calculating Returns You bought a stock three months ago for $53.26 per share. The stock paid no dividends. The current share price is $58.97. What is the APR of your investment? The EAR?

Answer 1

Total return:

It is the total income from an investment. The total income includes the periodic incomes and the raise or drop in value of an asset. The formula to estimate total percentage returns is as follows:

Effective annual rate (EAR):

It is the actual rate that is earned by an individual. This interest rate is generally presented as it is compounded once in a year. The formula to determine EAR is as follows:

Where,

m refers to number of period

Compute the Annual percentage rate (APR):

It is given that Person X has bought a stock for $53.26 at three months ago, present stock’s market price is $58.97, and dividends are not paid.

Firstly, determine the returns from the stock.

Hence, total return from stock is.

Now, determine the APR from the stock.

Hence, APR from stock is.

Now, determine the EAR.

Hence, EAR from stock is.