Reference no: EM132552192
Consider the following data on the stock price and dividend payment of U-Work Inc. The dividends are paid out once a year on the 31st of December. The table below lists the stock prices right after the dividend has been paid out. The closing price in year t is the same as the opening price of the year t + 1.
Two investors, Drew and Jamie, invested $1, 000 at the opening prices of 2015.
Drew reinvests the dividends at the end of every year in the stock of U-Work Inc. Jamie stores the cash in a bank account paying a 0% interest rate.
2014: closing price=360, dividend paid=20
2015: closing price=350, dividend paid=20
2016: closing price=390, dividend paid=20
2017: closing price=320, dividend paid=20
2018: closing price=300, dividend paid=20
Question (a) Calculate the value of Drew's portfolio at the end of 2017, after the dividend for 2017 has been paid.
Question (b) Calculate the value of Jamie's portfolio at the end of 2017, after the dividend for 2017 has been paid.
Question (c) Are the two portfolios worth the same at the end of 2017? Why or why not?