# solution

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.
%

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