Question

An ABC Ltd share was selling for $8.01 two years ago. The share sold for $15.63...

An ABC Ltd share was selling for $8.01 two years ago. The share sold for $15.63 one year ago, and it is currently selling for $26.76. ABC Ltd pays a $0.76 dividend each year-end. What was the rate of return for owning ABC shares in the most recent year? (In percentages to two decimal places eg 2.881% is 2.88; don’t use % sign)

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Answer #1

Given,

Price of share two years ago = $8.01

Price of share one year ago = $15.63

Price of share currently selling = $26.76

Dividend paid every year = $0.76

Computation of rate of return for owning ABC Ltd shares in the most recent year

In the most recent year implies owing share in the just completed year.

Rate of return = [Price of share in current year - Price of share an year ago + Dividend]/Price of share an year ago

= [P1 - P0 + D]/P0

= [$26.76 - 15.63 + 0.76]/15.63

= $11.89/15.63

= 76.07%

Therefore rate of return for owning ABC shares in most recent year is 76.07%

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