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Question Five (A)

An investor bought 1000 shares of Ecobank Ghana Limited on 1^st January 2017 through an investment broker and instructed the broker to re-invest any dividends received in additional shares of Ecobank. During the year, Ecobank paid three dividends. The first was paid at the end of April. The next dividend, paid at the end of July, grew by 25% and the last paid in October grew by 20%. The information on dividends and share prices at the time of dividend payments is indicated below:

Date	Price Per share in Cedis	Dividend Per Share in Pesewas
January	20
April	25
July	23
October	18	120
December	24

The investor calculated the return on his investment for the one-year holding period using the simple method but is not sure whether this is correct. You are required to:

1. Determine what rate of return the investor obtained from the calculation (3 marks)
2. Explain the limitations in the calculation in (a) (3 marks)
3. Provide a correct calculation of the investors return using

1. The index method (3 marks)
2. The linking method (3 marks)

4. Show how much the investment is worth at the end of each month if the investor were to sell the shares at the price prevailing in that month and divide the investors gain into dividend yield and capital gain in both absolute and percentage terms. (3 marks)

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