You bought a stock three years ago and paid $45 per share. You collected a $2 dividend per share each year you held the stock and then you sold the stock for $47 per share. What was your annual compound rate of return?

Question

Quizplus · Accepted Answer

Using the formula:
45 = 2 x PVIFA (rr%, 3) + 47 x (PVIF (rr%, 3))
Solving for rr%, we get rr% = 8.51%. Therefore, the annual compound rate of return is 8.51%.

You Bought a Stock Three Years Ago and Paid $45