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

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter7: Common Stock: Characteristics, Valuation, And Issuance

Section: Chapter Questions

Problem 13P

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