Three months ago, you purchased a stock for $54.14. The stock is currently priced at $57.36. What is the EAR on your investment?

The EAR on the investment is 23.79%

Explanation:

Here, we are concerned with calculating the EAR on the stock investment.

Firstly, we start with calculating the return on shares

Mathematically, that is; P1 - P0

From the question P1 = $57.36 while P0 = $54.14

So Return on shares = $57.36-$54.14 = $3.22

We proceed with calculating the Return on shares in percentage

Mathematically;

Return on shares in % = Return on shares/P0 * 100

= 3.22/54.14 * 100 = 5.95%

Lastly we calculate the effective annual interest;

The effective annual interest = 5.95%/3 * 12 = 23.79%

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