For each scenario, indicate whether the price of the stock appreciates or deprec

Question

For each scenario, indicate whether the price of the stock appreciates or depreciates, and calculate your investment return. Instructions: Enter your responses for the returns rounded to two decimal places. If entering a negative number, be sure to use a negative (-) sign. a) In February 2016 you purchased a share of McDonald's stock at $121.72. In February 2017 it was worth $125.82, and McDonald's declared a $0.94 dividend. Did the price of the stock appreciate or depreciate? What was your return? % b) In October 2016 you purchased 100 shares of Yahoo stock $32.15 per share. The current price of Yahoo stock is $33.43. Did the price of the stock appreciate or depreciate? What was your return? % c) In March 2016 you purchased 500 shares of Alibaba for $105.55 per share. In March 2017 the price of Alibaba was $102.63. Did the price of the stock appreciate or depreciate? What was your return? %

Explanation / Answer

Ans A)

Return on a stock=D1/S0+(P1-P0)/SO=0.94+(125.82-121.72)/121.72=5.04/121.72*100=504/121.72=4.1406%

Stock price appreciated

Ans B)

Returns are (33.42/32.15)-1=4.0217% hence stock is appreciated appreciated

Ans C)

Return on stock=(102.63/105.55)-1=-2.766%

Stock is deprecated

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