Demonstrate your understanding of financial concepts by completing the following problems. Where appropriate, show or explain your work. You may use Excel to work on the problems.

Problem 1. Calculating returns: A stock with an initial price of $55 per share paid a dividend of $1.75 per share throughout the year, with an ending price of $59. Calculate the percentage total return of the stock.

Problem 2. Calculating returns: One year ago, you bought an 8.75 percent coupon bond for $1,065. Today the bond sells for $990.

Calculate the total real rate of return on the investment with a $1,000 face value.
Calculate your total nominal rate of return on the investment this past year.

Sample Solution