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BUS 305 Module 4 Session Long Project

# BUS 305 Module 4 Session Long Project - Microsoft Nominal...

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Microsoft Nominal and Real Returns Robert J. Blair Trident University International BUS 305 Module 4 Session Long Project Dr. Babb 5 Jun 2011 Microsoft Nominal and Real Returns 1) Use the Internet site to chart the price history of the company they selected over the past five years. Historical Quotes of Microsoft Corp. (msft) Stock YEAR PRICE Jun 2007 27.17 Jun 2008 24.05 Jun 2009 22.17 Jun 2010 22.47 Jun 2011 23.91 (Yahoofinance, 2011) | | | | | | | | | | | | | | | | | | 2) Now use the information from the price history to calculate the nominal and real rate of return.

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Microsoft (msft) Nominal return: In 2007, suppose I invested \$1000 in Microsoft stock. I would have \$1000/\$27.17 = 36.80 shares of stock with a nominal value of \$1000. In 2011, the nominal return on my Microsoft stock is 36.80 shares * current price of \$23.91 = a nominal total return of \$879.89. The nominal rate of return (879.89 - 1000)/1000 = -0.12 * 100 = -12% (TUI, 2010) Microsoft (msft) Real return: If we assume the inflation rate is 3% per year: Microsoft’s real rate of return = -12% - (3% * 5 years) = -12% - 15% = -27% (TUI, 2010) Microsoft was definitely affected by the recession that hit in 2008.
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BUS 305 Module 4 Session Long Project - Microsoft Nominal...

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