Question

You bought a stock six months ago for $80.82 per share. The stock paid no dividends. The current share price is $86.59. Required:What is the APR and EAR of your investment? (Do not round intermediate calculations. Enter your answers as a percentage rounded to 2 decimal places (e.g., 32.16).) InvestmentAPR % EAR %

Answer 1

Answer:

APR = 14.28%

EAR = 14.7%

Explanation:

Stock price = $80.82

Current stock price = $86.59

The return will be as below since no dividend was stated

R = ($86.59 - $80.82) / 80.82

R = 0.0714

R = 7.14%

For six months, the return was 7.14%

Annual percentage yield (APR) = 2*(7.14%) = = 14.28%. Therefore, the value of APR = 14.28%

Effective Annual Return = [1 + (Annual Rate/ N )] ^N - 1

= [1 + (14.28% / 2]^2 - 1

= [1 + 0.071]^2 -1

= 1.147 - 1

= 0.147

= 14.7%