Consider the purchase of a stock at the beginningof Year 1 at $40 per share. During the years1 through 4, you have the following results:

Year     Dividend at end of the period                         Ending stock price

1                      $1.00                                                               $42.00

2                      $1.50                                                               $42.18

3                      $2.00                                                               $38.70

4                      $2.50                                                               $40.00

What is the average annual return on this investment?

Answer rating: 100% (QA)

To calculate the average annual return on the investment we can use the formula for Compound Annual ... View the full answer