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You purchased 100 shares of stock for $5 per share. After holding the stock for 8 years and not recieving any dividends, you sell the stock for $42 per share. What are the holding period and annual return on this investment?
a. 185%, 14.42%
b. 920%, 41.63%
c. 740%, 30.48%
d. 625%, 27.66%

Respuesta :

tutordamola

Answer:

The answer is C.

Explanation:

The formula for holding period is:

(Future value/present value) - 1

Future value = $42 per share

Present Value = $5 per share

(42/5) - 1

=8.4 - 1

7.4

Expressed as a percentage:

740%

B. Annual return on investment

(1+AHP)^(1/n) - 1

Where AHP is the annual holding period

n is the number of years

[(1+7.4)^(1/8)] - 1

[8.4^ 0.125] - 1

1.3048 - 1

0.3048

Expressed as a percentage

30.48%

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