You Purchased a Stock Eight Months Ago for $55 a Share

question 18

Multiple Choice

You purchased a stock eight months ago for $55 a share. Today, you sold that stock for $64.50 a share. The stock pays no dividends. What was your annualized rate of return?

• A)17.27%
• B)18.15%
• C)18.35%
• D)19.34%
• E)27.00%

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Definitions:

Arithmetic Average Return

The simple mean of a set of returns, calculated by summing the returns over a period and dividing by the number of periods.

Nominal Return

The amount of money gained or lost on an investment, without adjusting for inflation, as opposed to the real return which is adjusted for inflation.

Real Rate

The interest rate adjusted for inflation, representing the true cost of borrowing or the true return on investment.

Variance

A statistical measurement of the dispersion of a set of values, indicating how much the numbers in the set deviate from the mean or average of the set.