Martin good purchased corporate stock 7 years ago for $6000. He received quarter

Question

Martin good purchased corporate stock 7 years ago for $6000. He received quarterly dividends of $60 at the end of each quarter for the first four years nothing the fifth year, and $65 at the end of each quarter for the last 2 years. Immediately after receiving the last quarterly dividend, martin sold the stock for $14500. What interest rate compounded quarterly did he earn? Martin good purchased corporate stock 7 years ago for $6000. He received quarterly dividends of $60 at the end of each quarter for the first four years nothing the fifth year, and $65 at the end of each quarter for the last 2 years. Immediately after receiving the last quarterly dividend, martin sold the stock for $14500. What interest rate compounded quarterly did he earn?

Explanation / Answer

Martin good purchased corporate stock 7 years ago for $6000

Hence, principal =6000

He received quarterly dividends of $60 at the end of each quarter for first four years

Hence, total dividends of first 4 years =60×4×4=960

And $65 at the end of last two years

Hence, total dividends of last two years = 65×4×2=520

He gets total dividends = 960+520=1480

He sold stock for $14500

Hence, he gets total amount= 14500+1480=15980

For quarterly, rate=r/4 and time=4t=4×7=28

Amount=principal (1+r/100)^t

15980=6000 (1+r/400)^28

15980/6000=(1+r/400)^28

(15980/6000)^1/28 = (1+r/400)

1.412953/1.364375 = (1+r/400)

1.035604 = (1+r/400)

1.035604 -1 = r/400

r/400=0.035604

r/4 = 3.56 is required rate of 7years compounded quarterly.

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