On January 1, a shareholder purchased 81 shares of stock in Beta company for $115 per share. On August 20, the company paid an $8 dividend per share. On December 31, the shareholder sold all the shares for $113 per share. What is the overall Economic Rate of Return for this investment? a. 8.70% b. 6.96% c. 5.22% d. 5.31%

On January 1, a shareholder purchased 81 shares of stock in Beta company for $115 per share. On August 20, the company paid an $8 dividend per share. On December 31, the shareholder sold all the shares for $113 per share. What is the overall Economic Rate of Return for this investment? a. 8.70% b. 6.96% c. 5.22% d. 5.31%

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter14: Distributions To Shareholders: Dividends And Repurchases

Section: Chapter Questions

Problem 2STP

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Question

11. On January 1, a shareholder purchased 81 shares of stock in Beta company for $115 per share. On August 20, the company paid an $8 dividend per share. On December 31, the shareholder sold all the shares for $113 per share. What is the overall Economic Rate of Return for this investment?

a. 8.70% b. 6.96% c. 5.22% d. 5.31%

Definition Definition Percentage gain or loss from a specific investment over time. The rate of return is the difference between the closing and initial values of an investment divided by the initial value of the investment. The closing value includes any intermediate cash flows such as dividends or interest amounts.

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