Activity Overview
In this activity, students will determine the internal rate of return of the cashflows associated with the stock purchase, dividends, and sale. They will carry out explorations by varying the selling price of the stock and examining the impact on the rate of return.
Before the Activity
See the attached PDF file for detailed instructions for this activity
Print page 46 - 48 from the attached PDF file for your class
During the Activity
Distribute the pages to the class.
Follow the Activity procedures:
Calculate the internal rate of return for the stock price
Vary the selling price and for each stock price calculate the internal rate of return
Prepare a graph of stock sale price versus the internal rate of return
For a certain rate of inflation, find the price at which the stock is to be sold to breakeven (using graphs and tables)
Calculate the internal rate of return given the purchase price, dividend amounts, and the selling price
After the Activity
Review student results:
As a class, discuss questions that appeared to be more challenging
Re-teach concepts as necessary