In-line exercise: security returns, solution (1)
Ursidae Corp's common stock was worth $50/share at the end of December, $55/share at the end of January, $50/share at the end of February, and $27/share at the end of March. There was a $10 dividend paid in February, and a 2-for-1 stock split in March. Compute the three monthly rates of return for Ursidae Corp.
solution
Phil Dybvig
| By definition, the rate of return over a period is the change in value over the period divided by the value at the start of the period. In the first month, the stock goes from $50 to $55, an increase in value of $5. This is 10% of the value at the start of the period. | |
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