On the advice of your uncle, you purchased 10 shares of a well-established U.S.-based corporate stock for $21 per share. After 1 quarter, you received $0.25 per share dividends each quarter for 2 years. At that point, the stock price had gone down in a short-term recession, so you purchased 10 more shares at $18 per share. The stock continued to pay 25¢ a share on all 20 shares. After 3 years (12 quarters), you decided to sell the stock since it had increased in market value to $24 per share. Make the following assumptions: (a) no commissions for the purchase or sale of the stock, (b) no government taxes on the dividends, and (c) quarterly compounding of the rate of return. What is the effective interest rate per year? The effective interest rate per year is %. On the advice of your uncle, you purchased 10 shares of a well-established U.S.-based corporate stock for $21 per share. After 1quarter, you received $0.25 per share dividends each quarter for 2 years. At that point, the stock price had gone down in a short-termrecession, so you purchased 10 more shares at $18 per share. The stock continued to pay 25¢ a share on all 20 shares. After 3 years(12 quarters), you decided to sell the stock since it had increased in market value to $24 per share. Make the following assumptions: (a)no commissions for the purchase or sale of the stock, (b) no government taxes on the dividends, and (c) quarterly compounding of therate of return. What is the effective interest rate per year?The effective interest rate per year is%.

Interest rate can be calculated by using the spreadsheet function IRR(CF1:CFn).

Answered: On the advice of your uncle, you…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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On the advice of your uncle, you purchased 10 shares of a well-established U.S.-based corporate stock for $21 per share. After 1 quarter, you received $0.25 per share dividends each quarter for 2 years. At that point, the stock price had gone down in a short-term recession, so you purchased 10 more shares at $18 per share. The stock continued to pay 25¢ a share on all 20 shares. After 3 years (12 quarters), you decided to sell the stock since it had increased in market value to $24 per share. Make the following assumptions: (a) no commissions for the purchase or sale of the stock, (b) no government taxes on the dividends, and (c) quarterly compounding of the rate of return. What is the effective interest rate per year?

The effective interest rate per year is %.

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