Question

A couple bought some stock for $30 per share that pays an annual dividend of $1.80 per share. After 2 years the price of the stock was $33.

(a) What is the return on investment?

Correct: Your answer is correct.
%

(b) Find the simple interest rate on the growth of their investment.

Incorrect: Your answer is incorrect.

Answer 1

The return on investment is 10%. The simple interest rate on the growth of their investment is also 10%.

Step-by-step explanation:

The return on investment can be calculated using the formula:

Return on Investment = (Ending Value - Initial Value) / Initial Value * 100%

Here, the initial value is $30 and the ending value is $33. Plugging these values into the formula, we get:

Return on Investment = (33 - 30) / 30 * 100%

= 3 / 30 * 100%

= 0.1 * 100%

= 10%

Therefore, the return on investment is 10%.

To find the simple interest rate on the growth of their investment, we need to find the annual growth rate. The annual growth rate can be calculated using the formula:

Growth Rate = (Ending Value - Initial Value) / Initial Value * 100%

Plugging in the values, we get:

Growth Rate = (33 - 30) / 30 * 100%

= 3 / 30 * 100%

= 0.1 * 100% = 10%

Therefore, the simple interest rate on the growth of their investment is 10%.