You purchased 100 shares of stock for $5 per share. After holding the

You purchased 100 shares of stock for $5 per share. After holding the stock for 8 years and not receiving any dividends, you sell the stock for $42 per share. What are the holding period and annual return on this investment?

A) 920%, 41.63%
B) 740%, 30.48%
C) 625%, 27.66%
D) 185%, 14.42%

ANSWER

Answer: B
Explanation: B) HPR = = ($42 – $5)/$5 = 740%
EAR = (1 + hpr) (1/n) – 1 = (1+7.4)(1/8) – 1 = 30.48%.