Suppose we bought Microsoft at $100 a year ago and received a $2 dividend during the year. If the stock price today is $150, what is our simple rate of return over the period?

You are thinking of investing in a mutual fund that had returns of 20%, -10% and 40% over each of the last three years. Compute the arithmetic and the geometric mean annual rates of return. Which is the relevant return?

Suppose you are a Brazilian investor thinking of investing in long-term government bonds yielding 150%. If the inflation rate is 130%, what is the real rate of return on these bonds?

You face a choice between investing in two securities, both priced at $100. One has a certain payoff of $110 next year. The other will pay either $90 or $130 with equal chance next year. Which security would you choose?

If T-Bills are yielding 5% and the stock market has a historical risk premium of 8.6%, what rate of return do investors require on stocks over the next year?

Answer rating: 100% (QA)

To calculate the simple rate of return over the period for Microsoft stock we use the formula Simple ... View the full answer