You bought a stock for $28.29 that paid the following dividends? Year            1       2        3 Dividend  $1.00  $1.50  $1.80 After the third year, you sold the stock for $35. What was the annual rate of return?

What will be an ideal response?


?$28.29 = $1.00  +$1.50  + $1.80 + $35             (1 + r)     (1 + r)2     (1 + r)3?Select a rate and determine if it equates both sides of the equation. For example, select 12 percent:?     $1(.893) + 1.50(.797) + 1.80(.712) + 35(.712) = $28.29?The annual rate of return is 12 percent.?The same answer may be derived using a financial calculator, but it requires the student to enter unequal cash inflows for each period.

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