FIN 3000 Chapter 12 Homework

One year ago, you purchased a stock at a price of $27.66. The stock pays quarterly dividends of $.60 per share. Today, the stock is selling for $31.04 per share. What is your capital gain on this investment?

$3.38

Suppose a stock had an initial price of $85 per share, paid a dividend of $2.00 per share during the year, and had an ending share price of $83. Compute the percentage total return. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

0.00%

Calculate the geometric average return for the returns in the following table: S&P Returns 10.25 37.80 45.07 (8.10) (20.16)

10.09%

Five years ago, you decided to purchase the stock of Blue Corp.. This stock has had returns of 6 percent, -21 percent, 17 percent, 10 percent, and 2 percent over these past five years. What is the standard deviation of these returns?

14.41%

Suppose a stock had an initial price of $53 per share, paid a dividend of $1.45 per share during the year, and had an ending share price of $55. Compute the percentage total return. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

6.51%

You decided to purchase Dips Inc. stock five years ago. The stock has had annual returns of 6 percent, 14 percent, 6 percent, -5 percent, and 4 percent for the past five years, respectively. What is the standard deviation of returns for this stock?

6.78%

Which of the following statements is true based on the historical record for 1926-2019?

Bonds are generally a safer, or less risky, investment than are stocks. ???

Suppose a stock had an initial price of $52 per share, paid a dividend of $1.50 per share during the year, and had an ending share price of $55. What was the dividend yield and the capital gains yield? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

Dividend Yield = 2.88%; Capital Gains Yield = 5.77%

Which one of the following correctly describes the dividend yield?

Next year's annual dividend divided by today's stock price

Which one of the following best defines the variance of an investment's annual returns over a number of years?

The average squared difference between the actual returns and the arithmetic average return

Vanessa purchased a stock one year ago and sold it today for $3.15 per share more than her purchase price. She received a total of $2.60 per share in dividends. Which one of the following statements is correct in relation to this investment?

The capital gains yield is positive.

The geometric average return answers the question,

What was your average compounded return per year over a particular period?

Suppose you bought a bond with an annual coupon rate of 7.4 percent one year ago for $900. The bond sells for $940 today. a. Assuming a $1,000 face value, what was your total dollar return on this investment over the past year? b. What was your total nominal rate of return on this investment over the past year? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) c. If the inflation rate last year was 2 percent, what was your total real rate of return on this investment? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

a. $114 b. 12.67% c. 10.46%

Suppose you bought a bond with an annual coupon of 6 percent one year ago for $1,010. The bond sells for $1,025 today. a. Assuming a $1,000 face value, what was your total dollar return on this investment over the past year? b. What was your total nominal rate of return on this investment over the past year? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) c. If the inflation rate last year was 3 percent, what was your total real rate of return on this investment? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

a. $75 b. 7.43% c. 4.30%

Refer to Table 12.2. a. What was the average annual return on large-company stocks from 1926 through 2019 in nominal terms? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What was the average annual return on large-company stocks from 1926 through 2019 in real terms? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

a. 12.1% b. 8.94%

A stock had returns of 19 percent, 14 percent, 12 percent, -4 percent, 10 percent, and 4 percent over the last six years. a. What is the arithmetic return for the stock? b. What is the geometric return for the stock?

a. 9.17% b. 8.91%

A stock has had returns of 6 percent, 29 percent, 13 percent, −19 percent, 34 percent, and −2 percent over the last six years. What are the arithmetic and geometric average returns for the stock? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

arithmetic: 10.17% geometric: 8.63%

A stock has had returns of 14 percent, 21 percent, 23 percent, −18 percent, 28 percent, and −5 percent over the last six years. What are the arithmetic and geometric average returns for the stock? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

arithmetic: 10.5% geometric: 9.16%

Returns Year X Y 1 15% 22% 2 29 30 3 10 10 4 −22 −27 5 10 21 Using the returns shown above, calculate the arithmetic average returns, the variances, and the standard deviations for X and Y. (Do not round intermediate calculations. Enter your average return and standard deviation answers as a percent rounded to 2 decimal places, e.g., 32.16, and round the variance answers to 5 decimal places, e.g., .16161.)

avg return X = 8.4% avg return Y = 11.2% variance X = 0.03493 variance Y = 0.05221 standard deviation X = 18.69% standard deviation Y = 22.85%

The average compound return earned per year over a multiyear period is called the _____ average return.

geometric

According to the video, short-run projected wealth levels calculated using geometric averages are probably ______________.

pessimistic

Which one of the following categories of securities had the highest average annual return for the period 1926-2019?

small company stocks

Suppose a stock had an initial price of $58 per share, paid a dividend of $1.90 per share during the year, and had an ending share price of $49. Compute the percentage total return, dividend yield, and capital gains yield. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

total return: -12.24% dividend yield: 3.28% capital gains yield = -15.52%

Standard deviation is a measure of which one of the following?

volatility