An investor wants to calculate the continuously compounded return for month t for a company.If the share price of the company was $4.50 at the start of month t and $7.25 at the end of month t and the company paid a dividend of $0.80 in month t,then the month t return is:

Question

Quizplus · Accepted Answer

The dividend should be included in the calculation of return,as it represents a return to the investor.Hence,the continuously compounded return to the investor is ln((7.25+ 0.80)/4.5)= 0.5816 or 58.16%.

An Investor Wants to Calculate the Continuously Compounded Return for Month