Question

Find the compounded annual realized return of Microsoft stock assuming that you bought the stock on November 18, 2008 and sold it on November 17, 2009 after receiving the $0.11 per share dividend.

Answer in percent and round to nearest hundredth.

Use this price and dividend information:

Date. Price. Dividend

11/28/08 18.56

2/17/09 19.78 0.11

5/19/09 17.67 0.11

8/18/09 20.74 0.11

11/17/09 22.93 0.11

Answer 1

calculating return for every period using formula (final value - initial value + dividend)/initial value

So, for Nov 28 to feb 17, return a = (19.78 + 0.11 - 18.56)/18.56 = 7.17%

for feb 17 to May 19, return b = (17.67 + 0.11 -19.78)/19.78 = -10.11%

for may 19 to Aug 18, return c = (20.74 + 0.11 - 17.67)/17.67 = 18.00%

for Aug 18 to Nov 17, return d = (22.93 +0.11 - 20.74)/20.74 = 11.09%

So, return over period = (1+a)*(1+b)*(1+c)*(1+d) - 1 = 1.0717*0.898*1.18*1.1109 -1 = 26.27%

Compounded annual realized return of Microsoft stock = 26.27%