On the advice of your uncle, you purchased 10 shares of a well-established U.S-based corporate stock for $20 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 $16 per share. The stock continued to pay 25e 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 $23 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 $20 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 $16 per share. The stock continued to pay 25e 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 $23 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 %.
Chapter5: The Cost Of Money (interest Rates)
Section: Chapter Questions
Problem 6PROB
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Transcribed Image Text:On the advice of your uncle, you purchased 10 shares of a well-established U.S.-based corporate stock for $20 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 $16 per share. The stock continued to pay 25e 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 $23 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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