HW 9 Fundamentals of corporate finance

Q.1

Initial Price 79

Dividend Paid 1.45

Ending Share Price 71

Calculate

Total Return

Dividend Yield

Capital Gains Yield

Q2.

Suppose a stock had an initial price of $72 per share, paid a dividend of $2.60 per share during the year, and had an ending share price of $84.

Compute the percentage total return. (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Total return %

Q3

Suppose a stock had an initial price of $52 per share, paid a dividend of $1.00 per share during the year, and had an ending share price of $62.

What was the dividend yield and the capital gains yield? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Dividend yield %

Capital gains yield %

Q.6

Returns

Year X Y

1 12 % 23 %

2 15 27

3 – 12 – 13

4 11 11

5 10 17

Using the returns shown above, calculate the average returns, the variances, and the standard deviations for X and Y (Do not round intermediate calculations and round your final percentage answer to 2 decimal places. (e.g., 32.16) and variances to 5 decimal places. (e.g., 32.16161))

X Y

Average returns % %

Variances

Standard deviations % %

Q8

A stock has had returns of 17.22 percent, 12.30 percent, 6.21 percent, 27.46 percent, and −13.74 percent over the past five years, respectively.

What was the holding period return for the stock? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Holding-period return %

Q10

A stock has had returns of 16 percent, 23 percent, 15 percent, −11 percent, 30 percent, and −5 percent over the last six years.

What are the arithmetic and geometric returns for the stock? (Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16))

Arithmetic return %

Geometric return %

Ques. 9

Q 9.

What are the portfolio weights for a portfolio that has 134 shares of Stock A that sell for $44 per share and 114 shares of Stock B that sell for $34 per share? (Do not round intermediate calculations and round your answers to 4 decimal places. (e.g., 32.1616))

Portfolio weights

Stock A

Stock B

Q10.

You own a portfolio that is 30 percent invested in Stock X, 20 percent in Stock Y, and 50 percent in Stock Z. The expected returns on these three stocks are 9 percent, 15 percent, and 11 percent, respectively. What is the expected return on the portfolio? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Portfolio expected return %

Q11

Based on the following information:

Rate of Return If State Occurs

State of Probability of

Economy State of Economy Stock A Stock B

Recession 0.22 0.1 − 0.17

Normal 0.52 0.13 0.12

Boom 0.26 0.18 0.29

Calculate the expected return for the two stocks. (Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16))

Expected return

Stock A %

Stock B %

Calculate the standard deviation for the two stocks. (Do not round intermediate calculations and round your answers to 2 decimal places. (e.g., 32.16))

Standard deviation

Stock A %

Stock B %

Q12.

A stock has a beta of 1.04, the expected return on the market is 10%, and the risk free rat is 3.5%.

What must the expected return on this stock be?

(Do not round intermediate calculations and round your answers to 2 decimal places.)

Expected Return %