An investor purchased 100 shares of Omega common stock for 10,000. He held the s

Question

An investor purchased 100 shares of Omega common stock for 10,000. He held the stock for nine years. For the first four years he received annual end-of-year dividends of $1,000. For the next four years he received annual dividends of $400. He received no dividend for the ninth year. At the end of the ninth year he sold his stock for $11,000. What rate of return did he receive on his investment? (Try 9%)

What I've gathered so far is:

$10,000=$400(P/A,i%,8)+$400(P/A,i%,4)+$11,000(P/F,i%,9)

Try i=9%

$400(5.535)+$400(3.240)+$11,000(0.4604)=$8,574.4<$10,000

Try i=8%

$400(5.747)+$400(3.312)+$11,000(0.5002)=$9,125.8<$10,000

Try i=7%

$400(5.971)+$400(3.387)+$11,000(0.5439)=$9,726.1<$10,000

Try i=6%

$400(6.210)+$400(3.465)+$11,000(0.5919)=$10,380.9>$10,000

Explanation / Answer

Total Return on investment ={( End of the period Investment Value - Beginning Value of Investment) + Dividends } / Beginning Value of investment                                         = {11,000 - 10,000) + 5600 } / 10,000                                        = 0.66 or 66 %

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