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    Stock of General Medical Corp.

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    Assume that $10,000 was invested in stock of General Medical Corporation with the intention of selling after one year. The stock pays no dividends, so the entire return will be based on the price of the stock when sold. The opportunity cost of capital on the stock is 10%.
    a. To begin, assume that the stock sale nets $11,500. What is the dollar return on the stockinvestments? What is the rate of return?
    b. assume that the stock price falls and the net is only $9.500 when the stock is sold. What is the dollar return and rate of return?
    c.Assume that the stock is held for 2 years. What is the dollar return and rate of return?

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    Solution Preview

    a. 11,500-10,000*(1.1)= 500 --> profit
    ROR(rate of return) = 500/10,000= 5%

    b. ...

    Solution Summary

    The stock of general medical corporations are examined.