The ex-dividend price for a share in an index tracking fund is $700. One year ;ater it stands at $900 and two years later at $750. You buy 10 shares now, 20 in year 1 and sell all 30 in year 2. Dividends per share are $7 per annum, payable at the year end. Calculate (i) the internal rate of return for the period of two years and contrast it with (ii) the index rate of return for the same period. Explain the terms used to further distinguish between the two methods of calculation
The ex-dividend price for a share in an index tracking fund is $700. One year ;ater it stands at $900 and two years later at $750. You buy 10 shares now, 20 in year 1 and sell all 30 in year 2. Dividends per share are $7 per annum, payable at the year end. Calculate (i) the internal rate of return for the period of two years and contrast it with (ii) the index rate of return for the same period. Explain the terms used to further distinguish between the two methods of calculation
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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Transcribed Image Text:The ex-dividend price for a share in an index
tracking fund is $700. One year ;ater it stands at
$900 and two years later at $750. You buy 10
shares now, 20 in year 1 and sell all 30 in year 2.
Dividends per share are $7 per annum, payable
at the year end. Calculate (i) the internal rate of
return for the period of two years and contrast it
with (ii) the index rate of return for the same
period.
Explain the terms used to further distinguish
between the two methods of calculation
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