Suppose that a person bought 100 shares of company X for 50 euros per share on...

 

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Suppose that a person bought 100 shares of company X for 50 euros per share on 01.01.2020. The commission fee charged on this transaction was 25 euros. This person kept these stocks for 2 years and sold his portfolio of company X stocks on 01.01.2022 for 60 euros per share. The commission fee charged on this transaction was 30 euros. During the holding period the investor received dividends 3 euros per share on 01.01.2021 and dividends 2 euros per share on 01.01.2022. Suppose that the realized capital gains are taxed at 20%, commission fees are deductible from taxable income and the dividends are tax exempt in the country of residence of this person. Suppose also that the annual rate of inflation in the country of residence of this person was 6% in 2020 and 6% also in 2021. a) Find the nominal after-tax holding period rate of return for this person from the investment described. Please round the returns calculated to the second decimal place. b) Find the real after-tax holding period rate of return for this person from the investment described. Please round the returns calculated to the second decimal place. Suppose that a person bought 100 shares of company X for 50 euros per share on 01.01.2020. The commission fee charged on this transaction was 25 euros. This person kept these stocks for 2 years and sold his portfolio of company X stocks on 01.01.2022 for 60 euros per share. The commission fee charged on this transaction was 30 euros. During the holding period the investor received dividends 3 euros per share on 01.01.2021 and dividends 2 euros per share on 01.01.2022. Suppose that the realized capital gains are taxed at 20%, commission fees are deductible from taxable income and the dividends are tax exempt in the country of residence of this person. Suppose also that the annual rate of inflation in the country of residence of this person was 6% in 2020 and 6% also in 2021. a) Find the nominal after-tax holding period rate of return for this person from the investment described. Please round the returns calculated to the second decimal place. b) Find the real after-tax holding period rate of return for this person from the investment described. Please round the returns calculated to the second decimal place.

Answer rating: 100% (QA)

To calculate the nominal aftertax holding period rate of return HPR we need to consider the following components Initial investment cost 100 shares 50 ... View the full answer