1 Using a format similar to the one illustrated in
1. Using a format similar to the one illustrated in this chapter, show the results of Rose’s experiment.
2. Calculate the following: (a) the portfolio’s dollar gain or loss, (b) the rate of return for the six-month period, (c) the annualized rate of return. Evaluate the portfolio’s performance. Do you have any advice for Rose? Explain.
Rose Geisler, a college graduate in electrical engineering, has a good position with a major electronics firm. Her current annual salary is $65,000, and, since Rose is single with no financial obligations, she plans to invest all her savings (around $11,000) in common stocks. Rose has done some research on security selection, and she feels capable of picking her own stocks. At present, she likes the technology sector and also thinks companies in the auto industry will do well.
At the advice of her former personal finance instructor, Rose has decided to have a trial run before she actually invests. So she has selected three stocks—Intel, Microsoft, and GM—and has tracked their performances for six months. The results follow:
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