For every question, please write down each main step before you obtain the final

Question

For every question, please write down each main step before you obtain the final answer. Correct final answer with incorrect related work (calculation) or without any work may receive 0 point. On the contrary, incorrect final answer with correct related work (calculation) will receive partial credits.

Question 1 –Investment Yields [4 points]: One year ago, Melissa purchased 50 shares of common stock for $20 per share. During the year, the value of her stock decreased to $15 per share. If the stock did not pay a dividend during the year, what yield did Melissa earn on her investment?

Explanation / Answer

Prices are enough to calculate yield, we will not used share quantity multipliers for simplification.

Using financial calculator BA II Plus - Input details:

#

FV = Future Value =

-$15

PV = Present Value =

$20

N = Total number of remaining payment periods =

1

PMT = Payment =

$0

CPT > I/Y = Rate =

                 -25.00

Convert Yield in annual and percentage form = Yield / 100 =

-25.00%

OR

We can also solve it as below:

Yield = (Current Value of stock – Purchased price) / Purchased price

Yield = (15-20)/20 = -5/20

Yield = -25.00%

Using financial calculator BA II Plus - Input details:

#

FV = Future Value =

-$15

PV = Present Value =

$20

N = Total number of remaining payment periods =

1

PMT = Payment =

$0

CPT > I/Y = Rate =

                 -25.00

Convert Yield in annual and percentage form = Yield / 100 =

-25.00%

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