Kathy Myers frequently purchases stocks and bonds, but she is uncertain how to determine the rate of return that she is earning. For example, six years ago she paid $22,000 for 930 shares of Malti Company's common stock. She received a $651 cash dividend on the stock at the end of each year for six years. At the end of six years, she sold the stock for $22,800. Kathy would like to earn a return of at least 13% on all of her investments. She is not sure whether the Malti Company stock provided a 13% return and would like some help with the necessary computations.
- The purchase of the stock is considered paid NOW so the factor is 1.0
- The dividend is received over 6 years so the factor is from the PV of an Annuity table.
- The sale of the stock is at the end of the sixth year so the factor is from the PV of $1.00 table.