Jason Purchased ABC Stock at $40 Per Share and DEF

question 132

Multiple Choice

Jason purchased ABC stock at $40 per share and DEF stock at $35 per share on the same day in 2015.Exactly 6 months later, the ABC stock is worth $42.00 per share and has not paid a dividend while the DEF stock is worth $36 per share and has paid 2 quarterly dividends of $0.50 each.The holding period returns are

• A)ABC, $2.00 and DEF $2.00.
• B)ABC 5% and DEF 2.9%.
• C)ABC 5% and DEF 5.7%.
• D)The holding period return cannot be determined because we do not know the discount rate.

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Definitions:

Output

The quantity of goods or services produced by a firm, industry, or economy in a specified period.

Production Function

An equation that quantifies the output that can be generated from different combinations of factor inputs, reflecting the efficiency and technology of the production process.

Returns To Scale

The change in output resulting from a proportional change in all input factors; identifies if output increases at a faster, equal, or slower rate than inputs.

Marginal Rate Of Substitution

The pace at which a consumer opts to swap one item for another, ensuring their overall happiness remains unchanged.