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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 $10,000 and collect $400 at the end of each year in dividends. You sell the stock for $11,300 after four years. What was the annual return on your $10,000 investment? %

2. You purchase a building for $900,000, collect annual rent (after expenses) of $120,000, and sell the building for $1,000,000 after three years. What is the annual return on this investment? %

3. You buy a stock for $1,000 and expect to sell it for $900 after four years but also expect to collect dividends of $120 a year. Calculate the return on this investment and prove that it is less than 12 percent. %