An investor bought 80 shares of stock at a cost of $7 per share. He held the stock for 14 years and then sold it for a total of $2,800. For the first two years, he received no dividends. For each of the next six years, he received total dividends of $70 per year. For the remaining period, he received total dividends of $140 per year. What rate of return did he make on the investment? The rate of return made on the investment is % (Round to two decimal places.)

An investor bought 80 shares of stock at a cost of $7 per share. He held the stock for 14 years and then sold it for a total of $2,800. For the first two years, he received no dividends. For each of the next six years, he received total dividends of $70 per year. For the remaining period, he received total dividends of $140 per year. What rate of return did he make on the investment? The rate of return made on the investment is % (Round to two decimal places.)

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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After reading this chapter, it isn't surprising that you're becoming an investment wizard. With your newfound expertise, you purchase 100 shares of KSU Corporation for $29.52 per share. Assume the price goes up to $36.77 per share over the next 12 months and you receive a qualified dividend of $0.69 per share. What would be your total return on your KSU Corporation investment? Assuming you continue to hold the stock, calculate your after-tax return. How is your realized after-tax return different if you sell the stock? In both cases assume you are in the 25 percent federal marginal tax bracket and 15 percent long-term capital gains and qualified dividends tax bracket and there is no state income tax on investment income. Your total rate of return on your KSU Corporation investment is % (Round to two decimal places.) Assuming you continue to hold the stock, your after-tax rate of return is%. (Round to two decimal places) Your realized after-tax rate of return if you sell the stock is%.…

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