Suppose you purchase one share of the stock of Volatile Engineering Corporation at the beginning of year 1 for $36.At the end of year 1,you receive a $2 dividend,and buy one more share for $30.At the end of year 2,you receive total dividends of $4 (i.e.,$2 for each share),and sell the shares for $36.45 each.The time-weighted return on your investment is ________.
A)-1.75%
B)4.08%
C)8.53%
D)11.46%
E)12.35%

Question

Quizplus · Accepted Answer

Year 1:

- Purchased 1 share at $36.
- Received a $2 dividend.

Year 2:

- Purchased 1 more share at $30.
- Received $4 in dividends ($2 per share).
- Sold 2 shares for a total of $72.90 ($36.45 per share).

To calculate the time-weighted return, we need to calculate the total return and the annualize it:

Total return = ($72.90 + $2 + $4) / ($36 + $30) - 1 = 1.5263

Annualized return = (1 + total return)^(1/2) - 1 = 0.0853 or 8.53%

Therefore, the answer is C) 8.53%.

Suppose You Purchase One Share of the Stock of Volatile