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Ranking investments by expected returns

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Ranking investments by expected returns

What makes for a good investment? Use the approximate yield formula or a financial calculator to rank the following investments according to their expected returns. Round the answers to two decimal places. Do not round intermediate calculations.

  1. Buy a stock for $45 a share, hold it for 2 years, then sell it for $80 a share (the stock pays annual dividends of $3 a share). 
  2. Buy a security for $25, hold it for 2 years, then sell it for $65 (current income on this security is zero). Do not round intermediate calculations.
  3. Buy a 1-year, 10 percent note for $960 (assume that the note has a $1,000 par value and that it will be held to maturity). Do not round intermediate calculations.

Reference no: EM131508757

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