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1) You bought 1,000 shares of stock for= $33 per share exactly 1 year ago. In the year, stock paid the $.50 dividend per share and present stock price is= $27 per share. Inflation rate last year was= 2%. Answer the following:

a) Compute actual return (also called percentage return) on your investment over last year.

b) Compute (i) dividend yield and (ii) percentage capital gain.

c) Compute real rate of return on stock.

2) You are interested in purchasing the stock which has a price of= $62. You have projected that next year there is= 10% probability stock will equal $10, a 20% probability the stock will equivalent $58, a 30% probability the stock will equivalent $63, a 30% probability stock will equal= $80, and a 10% probability stock will equal= $120. Reply the following:

a) Determine the expected return on stock if you purchase today and sell next year?

b) Compute the expected standard deviation of stock?

3) Determine 2 publicly traded stocks in various industries and look up estimates of their β.

a) By using Rf=1%, E(Rm) = 8%, compute the E(r) for each stock.

b) Describe in words a non-finance student could understand why 1 stock has higher expected return than other.

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Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M915088

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