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Homework answers / question archive / You purchased 100 shares of stock for $5 per share
You purchased 100 shares of stock for $5 per share. After holding the stock for 9 years and not receiving any dividends, you sell the stock for $40 per share. What are the holding period and annual return on this investment?
Computation of the holding period return:-
Holding period return = (Ending value - Beginning value) / Beginning value
= ((100 * $40) - (100 * $5)) / (100 * $5)
= ($4,000 - $500) / $500
= $3,500 / 500
= 700%
Computation of the annual return:-
Annual return = (Ending value / Beginning value) ^ (1/n)-1
= ($4,000 / $500) ^ (1/9) -1
= 1.2599 - 1
= 25.99%
