BUSN380 Week 4 TCO 4 Problem Set 4 - Calculating Yields, Bond & Book Values, Earnings Per Share

 

a.  What is the amount of profit you earned on each share of IBM stock?

 

Ans.

$103 – $88 = $15

      b.  What is the total amount of profit for your IBM investment?

    Ans.

    $15 x $150 = $2250

 

2.  Calculating Rate of Return. Assume that at the beginning of the year, you purchase an investment for $8,000 that pays $100 annual income. Also assume the investment’s value has decreased to $7,400 by the end of the year.

 

a.      What is the rate of return for this investment?

Ans.

$7400 - $8000 = (600)

(600) + 100 = (500)

(500) ÷ 8000 = 0.0625

Rate of return = 6.25%
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