Mary purchased 100 shares of Sweet Pea Co stock at a price o

Mary purchased 100 shares of Sweet Pea Co. stock at a price of $43.42 six months ago. She sold all stocks today for $45.24. During that period the stock paid dividends of $1.47 per share. What is Mary\'s effective annual rate? Round the answers to two decimal places in percentage form. (Write the percentage sign in the \"units\" box) Your Answer

Solution

Purchase Price = $43.42
Dividend paid = $1.47
Selling Price = $45.24

Semiannual Rate of Return = (Selling Price + Dividend paid - Purchase Price) / Purchase Price
Semiannual Rate of Return = ($45.24 + $1.47 - $43.42) / $43.42
Semiannual Rate of Return = 0.07577

Effective Annual Rate = (1 + Semiannual Rate of Return)^2 - 1
Effective Annual Rate = (1 + 0.07577)^2 - 1
Effective Annual Rate = 1.07577^2 - 1
Effective Annual Rate = 1.1573 - 1
Effective Annual Rate = 0.1573
Effective Annual Rate = 15.73%

So, Effective Annual Rate earned by Mary is 15.73%