Midterm Review- Finance HW2
You purchased a bond 75 days ago for $911.72. You received an interest payment of $32.00 68 days ago. Today the bond's price is $993.39. What is the holding period return (HPR) on the bond as of today?
12.47% HPR= ending price-beginning price+interest received/ beginning price
You put up $50 at the beginning of the year for an investment. The value of the investment grows 5% and you earn a dividend of $4.00. Your HPR was ____.
13.0% 5%+($4/50)=13.0%
The geometric average of −17%, 30%, and 35% is _________.
13.36% [(1+-0.17)(1+.30)(1+0.35)]^1/3-1=13.36%
You purchased a share of stock for $57. One year later you received $3.10 as dividend and sold the share for $56. Your holding-period return was _________.
3.68% 56+3.10-57/57=3.68%
The arithmetic average of -12%, 17%, and 22% is ________.
9.00% -12%+17%+22%/3=9.00%
ou invested in a 3-month certificate of deposit at your bank. Your investment was $1,634, and at the end of the term you will receive $1,746. a. What is the holding period return (HPR) on your investment? (Round your answer to 2 decimal places.) HPR Not attempted % b. What is the annual percentage rate (APR)? (Round your answer to 2 decimal places.) APR Not attempted % c. What is the effective annual rate (EAR)? (Round your answer to 2 decimal places.) EAR Not attempted % rev: 03_08_2018_QC_CS-121289
a. 6.85% HPR= (1746-1634)/1634 b. 27.42% 6.85%*(12/3) c. 30.37% =(1+0.2742/4)^4=1.3037
The ______ measure of returns ignores compounding.
arithmetic average
The excess return is the _________.
rate of return in excess of the Treasury-bill rate
The holding period return on a stock is equal to _________.
the capital gain yield over the period plus the dividend yield
An investment earns 10% the first year, earns 16% the second year, and loses 15% the third year. The total compound return over the 3 years was ______
8.46% (1.10)(1.16)(1-.15)-1=8.46%
Your investment has a 20% chance of earning a 30% rate of return, a 50% chance of earning a 10% rate of return, and a 30% chance of losing 6%. What is your expected return on this investment?
9.2% (.2)(30%)+(.5)(10%)+(.3)(-6%)=9.2%
Rank the following from highest average historical return to lowest average historical return from 1926 to 2017. I. Small stocks II. Long-term bonds III. Large stocks IV. T-bills
I, III,II,IV
The dollar-weighted return is the _________.
Internal rate of return
An investor buys six shares of XYZ at the beginning of 2015, buys another two shares at the beginning of 2016, sells one share at the beginning of 2017, and sells all seven remaining shares at the beginning of 2018. a. What are the arithmetic and geometric average time-weighted rates of return for the investor? b-1. Prepare a chart of cash flows for the four dates corresponding to the turns of the year for January 1, 2015, to January 1, 2018. b-2. What is the dollar-weighted rate of return? (Hint: If your calculator cannot calculate internal rate of return, you will have to use a spreadsheet or trial and error.)
a. 1.98%=A 1.65%=G b. -720,-246, 131, 854 b-2. $0.7483%
