Homework 11 ECF

Using the data in the table to the​ right, calculate the return for investing in the stock from January 1 to December 31. Prices are after the dividend has been paid.Date Price Dividend 1/2/03 $34.01 - 2/5/03 $31.10 $0.20 5/14/03 $30.05 $0.21 8/13/03 $33.15 $0.19 11/12/03 $40.10 $0.18 1/2/04 $42.12 -

First, calculate the return for each subperiod using the following example​ formula: Return from Jan 1 through Feb​ 5: R1=((31.10+0.20)/34.01)−1=−0.07968=−7.97% Return from Feb 5 through May​ 14: R2=((30.05+0.21)/31.10)−1=−0.02701=−2.70% Return from May 14 through Aug​ 13: R3=((33.15+0.19)/30.05)−1=0.10948=10.95% Return from Aug 13 through Nov​ 12: R4=((40.10+0.18)/33.15)−1=0.21508=21.51% Return from Nov 12 through Dec​ 31: R5=((42.12/40.10)−1)=0.05037=5.04% ​Then, calculate the total return for the period using the following​ formula: *1+ answers from above for each unit* for: R=(0.92032)×(0.97299)×(1.10948)×(1.21508)×(1.05037)−1=0.26798=26.80% Question .

Year 1 2 3 4 Return (%) -4.4 27.6 11.9 4.2

The average return​ is, R= (1/4) ×(−4.4%+27.6%+11.9%+4.2%)=9.83% b. The variance of the returns is Var=(1/3)×((−4.4%−9.83%)^2+(27.6%−9.83%)^2+(11.9%−9.83%)^2+(4.2%−9.83%)^2)=0.01847 c. The standard deviation is SD=sqrt 0.01847=13.59%

You bought a stock one year ago for $52.00 per share and sold it today for $58.00 per share. It paid a $1.25 per share dividend today. How much of the return came from dividend yield and how much came from capital​ gain?

Therefore, R1=$1.25/$52.00=2.4% The dividend yield is 2.4%. Therefore, R1=($58.00−$52.00)/$52.00=11.5% The capital gain yield is 11.5​%.

Consider the following five monthly​ returns: 0.08 0.01 0.07 0.11 0.02 a. Calculate the arithmetic average monthly return over this period. b. Calculate the geometric average monthly return over this period. c. Calculate the monthly variance over this period. d. Calculate the monthly standard deviation over this period.

a. To find the arithmetic​ average, use the following​ formula: ​Therefore, R=(1/5)×(0.08+0.01+0.07+0.11+0.02)=0.058 =5.80%. b. To find the geometric​ average, use the following​ formula: ​Therefore, R=((1.08×1.01×1.07×1.11×1.02)^(1/5))−1=0.057330 =5.733%. c. To find the​ variance, use the following​ formula: ​Therefore, Var(R)=(1/(5−1))×((0.08−0.058)^2+(0.01−0.058)^2+(0.07−0.058)^2+(0.11−0.058)^2+(0.02−0.058)^2)==0.00177 =0.177%. d. To find the monthly standard​ deviation, use the following​ formula: ​Therefore, SD(R)=Sqrt=(0.00177)=0.04207 =4.207%.

Date SBUX Dividend GOOG Dividend * 16-Nov-2017 $57.24 $0.00 $1048.47 $0.00 * 07-Feb-2018 $54.46 $0.30 $1055.41 $0.00 * 09-May-2018 $57.04 $0.30 $1088.95 $0.00 * 08-Aug-2018 $51.55 $0.36 $1261.33 $0.00 * 14-Nov-2018 $67.04 $0.36 $1054.58 $0.00 *

a. The return without the dividends​ is: R=(54.46/57.24)×(57.04/54.46)×(51.55/57.04)×(67.04/51.55)−1=17.12% The return with the dividends​ is: R=((54.46+0.30)/57.24)×((57.04+0.30)/54.46)×((51.55+0.36)/57.04)×((67.04+0.36)/51.55)−1=19.85% b. What is the return for GOOG over the​ period? The return​ is: R=(1055.41/1048.47)×(1088.95/1055.41)×(1261.33/1088.95)×(1054.58/1261.33)−1=0.58% c. If you have 62% of your portfolio in SBUX and 38% in​ GOOG, what was the return on your portfolio excluding​ dividends? The return of the portfolio​ is: R=0.62×17.12%+0.38×0.58%=10.83% Question is complete.

You have just purchased a share of stock for $21.45. The company is expected to pay a dividend of $0.65 per share in exactly one year. If you want to earn a 10.5% return on your​ investment, what price do you need if you expect to sell the share immediately after it pays the​ dividend?

​Therefore, P1=$21.45×0.105−$0.65+$21.45=$23.05 The selling price after the dividend would need to be $23.05.

You bought a stock one year ago for $52.00 per share and sold it today for $58.00 per share. It paid a $1.25 per share dividend today. What was your realized​ return?

​Therefore, R1=($1.25+($58.00−$52.00))/$52.00=13.9%

You expect KStreet​ Co's trade at ​$110 per share right after paying a ​$4.00 dividend per share in one year. What is the most you would pay to buy the stock now if you want to earn at least a return of 8​%?

​​Therefore, 0.08=($4.00+($110−P0))/P0 0.08P0=$114.00−P0 1.08P0=$114.00 P0=$114.00/1.08=$105.56 The most you would pay to buy the stock is ​$105.56.