The
common stock of Plaxo Enterprises had a market price of $9.45 on the day you
purchased it just 1 year ago. During the past year, the stock paid a dividend
of $1.43 and closed at a price of $11.66. What rate of return did you earn on
your investment in Plaxo’s stock? The rate of return you earned on Plaxo’s
stock is what percent?

Syntex is
considering an investment in one of two stocks. Given the information that
follows, which investment is better based on the risk (the standard deviation)
and return? Given the information in the table, what percent is the rate of
return for Stock B?

Caswell
Enterprises had the following end-of-year stock prices over the last five
years and paid no dividends.

Time

Caswell

1

$12

2

9

3

7

4

6

5

12

Calculate the annual
rate of return for each year from the above information.

What is the
arithmetic average rate of return earned by investing in Caswell’s stock
over this period?

What is the
geometric average rate of return earned by investing in Caswell’s stock
over this period?

Considering the
beginning and ending stock prices for the five-year period are the same,
which type of average rate of return best describes the annual rate of
return earned over the period (arithmetic or geometric)?

On
December 5, 2007, the common stock of Google, Inc. (GOOG) was trading at
$698.51. One year later, the shares sold for $301.99. Google has never paid a
common stock dividend. What rate of return would you have earned on your
investment had you purchased the shares on December 5, 2007? The rate of return
you would have earned is what percent?