Multiple Choice: Nancy bought 50 shares of ABC stock for $50 per share. She made additional purchases at the end of the each of the following years: Year 1: 10 shares at $52 per share Year 2: 10 shares at $53 per share Year 3: 10 shares at $45 per share ABC stock has not paid any dividends during her holding period. At the endof the fourth year, the stock is trading for $55 per share. What is Nancy\'s return over th past 4 years of ABC stock (assume she sells the stock for the current trading price)? A - 2.95% B - 3.25% C - 4.65% D - 5.00% Solution Calculation of Nancy\'s return over the past 4 years of ABC stock : Year Investment made Holding Period (Years) Sale value Profit Holding Period Return Average Return Investment Weight Weighted return A B C D = C-A E = D/A F= E/B G = A/4000 F*G Year 0 2500 4 2750 250 10.00% 2.50% 62.50% 1.56% (50 Shares * $50) (50 Shares * $55) Year 1 520 3 550 30 5.77% 1.92% 13.00% 0.25% (10 Shares * $52) (10 Shares * $55) Year 2 530 2 550 20 3.77% 1.89% 13.25% 0.25% (10 Shares * $53) (10 Shares * $55) Year 3 450 1 550 100 22.22% 22.22% 11.25% 2.50% (10 Shares * $45) (10 Shares * $55) Average return on investment = 4.56% Calculation of Nancy\'s return over the past 4 years of ABC stock : Year Investment made Holding Period (Years) Sale value Profit Holding Period Return Average Return Investment Weight Weighted return A B C D = C-A E = D/A F= E/B G = A/4000 F*G Year 0 2500 4 2750 250 10.00% 2.50% 62.50% 1.56% (50 Shares * $50) (50 Shares * $55) Year 1 520 3 550 30 5.77% 1.92% 13.00% 0.25% (10 Shares * $52) (10 Shares * $55) Year 2 530 2 550 20 3.77% 1.89% 13.25% 0.25% (10 Shares * $53) (10 Shares * $55) Year 3 450 1 550 100 22.22% 22.22% 11.25% 2.50% (10 Shares * $45) (10 Shares * $55) Average return on investment = 4.56%.