3. You purchase a stock today for $32.38. You think a similar risk investment sh
ID: 2384006 • Letter: 3
Question
3.
You purchase a stock today for $32.38. You think a similar risk investment should earn 11.6%. You plan to hold the stock for 3 years. If you sell the stock for $40.00, would you reach your required investment goal?
No; you earned 7.3% which is lower than the required 11.6%.
No; selling a stock is never a good idea.
Yes; you earned 15.4% which is greater than 11.6%.
Yes; you sold it for $8 dollars more than the price you bought it
No; you earned 7.3% which is lower than the required 11.6%.
No; selling a stock is never a good idea.
Yes; you earned 15.4% which is greater than 11.6%.
Yes; you sold it for $8 dollars more than the price you bought it
Explanation / Answer
Solution-
No; you earned 7.3% which is lower than the required 11.6%.
Calculation-
PV =$32.38
FV = $40.00
n = 3 Years
So,
r = (FV / PV)1/n -1
r = ($40.00 / $32.38)1/3 -1
r = 7.3%
So,
You earned less than your requirement.
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