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Problem 7-31

Use a financial calculator or a program such as Excel to answer the questions. Round your answers to the nearest whole number.

1. You purchase a stock for $9,000 and collect $300 at the end of each year in dividends. You sell the stock for $10,500 after five years. What was the annual return on your $9,000 investment? %

2. You purchase a building for $850,000, collect annual rent (after expenses) of $110,000, and sell the building for $950,000 after seven years. What is the annual return on this investment? %

3. You buy a stock for $1,000 and expect to sell it for $850 after five years but also expect to collect dividends of $130 a year. Calculate the return on this investment and prove that it is less than 13 percent. %