Timothy Keating Invested $120 in Buying a Share of Company

question 12

Multiple Choice

Timothy Keating invested $120 in buying a share of company X in June last year. Although the company had announced that it will not pay any dividend, the price of this share has increased over the last few months and is expected to go up to $140 by June this year. If the expected annual inflation rate in June this year is 5%, calculate Timothy's real rate of return from this investment if he sells the share at $140.

• A) 11.11%
• B) 14.29%
• C) −22.22%
• D) −10%

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Definitions:

Customer

An individual or entity that purchases goods or services from a company.

Job

A specific piece of work or task undertaken for payment or to achieve a particular result, often within the context of employment or contracting.

Owner's Withdrawals

Money or other assets taken out of a business by the owner for personal use, not considered a business expense.

Owner's Equity

The residual interest in the assets of a company after deducting liabilities, representing the owner's claim on the business assets.