Which of the following is more appealing? Why?
Stock X bought at $34 a share and sold for $36 in three months.
Stock Y bought at $120 a share and sold for $130 in six months.
No dividend is paid for either stock.
A) Y as it has a higher holding period percentage return
B) X because of the lower investment cost
C) X due to its higher effective annual return
D) Y since it provides a better dollar return
E) X and Y are equally attractive

Question

Quizplus · Accepted Answer

Stock X offers a higher effective annual return. The return for Stock X is approximately 5.88% over three months, which annualizes to a higher rate than Stock Y's return of approximately 8.33% over six months when both are adjusted for a 12-month period.

Which of the Following Is More Appealing? Why