Consider the following (actual) monthly adjusted closing price data for Microsof

Question

Consider the following (actual) monthly adjusted closing price data for Microsoft stock over the period December 2014 through December 2015. Table 1 Monthly Stock Price of Microsoft Stock (MSFT) Date MSFT Dec-14 $46.45 Jan-15 $40.40 Feb-15 $43.85 Mar-15 $40.66 Apr-15 $48.64 May-15 $46.86 Jun-15 $44.15 Jul-15 $46.70 Aug-15 $43.52 Sep-15 $44.26 Oct-15 $52.64 Nov-15 $54.35 Dec-15 $55.48 Using the data in the Table 1, what is the simple monthly return between the end of December, 2014 and the end of January 2015? If you invested $10,000 in Microsoft at the end of December 2014, how much would the investment be worth at the end of January 2015?

A. -13.025% and $8,697.52

B. 2.72% and $10,272.00

C. -3.047% and $9,695.30

D. -9.082% and $9,091.80

Table 1 Monthly Stock Price of Microsoft Stock (MSFT) Date Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 MSFT S46.45 S40.40 S43.85 S40.66 S48.64 S46.86 S44.15 S46.70 S43.52 S44.26 S52.64 S54.35 S55.48 4 6 10 12 13 14 15 16 17 18 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15

Explanation / Answer

The stock price in Dec -14 was $46.45. An sum of $10,000 was invested in the stock in Dec-14. The number of stocks owned would be 215.285 ($10,000/$46.45). In Jan-15 the stock price was $40.40, hence the value of 215.285 shares owned would be $8697.52 (215.285*$40.40). Therefore, the return on the stock is:

Return = ($8.697.52 - $10,000)/ $10,000 = -13.025%.

Hence, option A is correct

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