Suppose You Purchase One Share of the Stock of Mayfair

question 26

Multiple Choice

Suppose you purchase one share of the stock of Mayfair Company at the beginning of year 1 for $50. At the end of year 1, you receive a $1 dividend and buy one more share for $72. At the end of year 2, you receive total dividends of $2 (i.e., $1 for each share) and sell the shares for $67.20 each. The dollar-weighted return on your investment is

• A) 10.00%.
• B) 8.78%.
• C) 19.71%.
• D) 20.36%.

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Definitions:

Curvilinear Cost

A cost behavior pattern where costs increase with activity, but not at a constant rate, often depicted as a curved line on a graph.

Variable Cost

Costs that change in proportion to the level of activity or volume of production in a company.