Question

Nico bought 100 shares of Cisco Systems stock for $24.00 per share on January 1, 2002. He received a dividend of $2.00 per share at the end of 2002 and $3.00 per share at the end of 2003. At the end of 2004, Nico collected a dividend of $4.00 per share and sold his stock for $18.00 per share. What was Nico's realized return during the three year holding period? What was Nico's compound annual rate of

Answer 1

12.5%

Step-by-step explanation:

It is given that :

Nico bought shares from Cisco Systems = 100 shares

The stock of 100 shares on 1st Jan 2002 = $ 24 per share

At the end of 2002, Nico received a dividend = $ 2 per share

At the end of 2003, Nico received a dividend = $ 3 per share

At the end of 2004, Nico received a dividend = $ 4 per share

Nico sold his stock = $ 18 per share

Therefore,

The holding period
`$=\frac{(\text{dividend + end value - initial value })}{\text{initial value}}$`

`$=((\$2+\$3+\$4)+\$18-\$24)/(\$ \ 24)$`

`$= 12.5 \%$`