The Price of Microsoft Is $25 Per Share and That

question 88

Multiple Choice

The price of Microsoft is $25 per share and that of Apple is $50 per share. The price of Microsoft increases to $36 per share after one year and to $41 after two years. Also, shares of Apple increase to $56 after one year and to $66 after two years. If your portfolio comprises 100 shares of each security, what is your portfolio return over year 1 and year 2? Assume no dividends are paid.

• A) 21.53%, 14.67%
• B) 22.67%, 16.30%
• C) 24.93%, 18.75%
• D) 22.21%, 18.26%

---

Definitions:

Retained Earnings

The part of a company's earnings that is reserved or saved, instead of being distributed as dividends to its shareholders.

Par Common Stock

The nominal or face value of a share of common stock, as specified in the corporate charter.

Paid-In Capital

The sum of funds a corporation has obtained from its investors through the sale of stock shares.

Common Stock

A form of corporate equity ownership, representing a claim on a portion of the corporation's profits and assets.