Suppose You Purchase One Share of the Stock of Cereal

question 16

Multiple Choice

Suppose you purchase one share of the stock of Cereal Correlation 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%.