Quantitative Methods Q69

69An investor purchases one share of a stock for $44. Exactly one year later, the company pays a dividend of $4.00 per share. This is followed by two more annual dividends of $5.00 and $4.50 in successive years. Upon receiving the third dividend, the investor sells the share for $45.0 .The money-weighted rate of return on this investment is closest to:

Option : B
Explanation : The money-weighted rate of return is the internal rate of return (IRR) of the cash flows associated with the investment. Using a financial calculator, compute IRR. CF0 = – 44, CF1 = 4, CF2 = 5, CF3 = 49.50, CPT IRR. IRR = 10.87%.

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