Suppose you purchase one share of the stock of Volatile Engineering Corporation at the beginning of year 1 for $36. At the end of year 1, you receive a $2 dividend and buy one more share for $30. At the end of year 2, you receive total dividends of $4 (i.e., $2 for each share) and sell the shares for $36.45 each. The time-weighted return on your investment is
A) -1.75%.
B) 4.08%.
C) 6.74%.
D) 11.46%.
E) 12.35%.

Question

Quizplus · Accepted Answer

Year 1: ($30 + $2 $36)/$36 = 11.11%; Year 2: ($36.45 + $2 $30)/$30 = 28.17%; Time-weighted average: [(1- .1111)(1 + .2817)]^.5 1 = .0674.

Suppose You Purchase One Share of the Stock of Volatile