Question

1.Suppose you bought 900 shares of stock at an initial price of $44 per share. The stock paid a dividend of $0.42 per share during the following year, and the share price at the end of the year was $39.

a. Compute your total dollar return on this investment. (A negative value should be indicated by a minus sign.)

b. What is the capital gains yield? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

c. What is the dividend yield? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

d. What is the total rate of return on the investment? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

2.The rates of return on Cherry Jalopies, Inc., stock over the last five years were 24 percent, 11 percent, −6 percent, 7 percent, and 10 percent. Over the same period, the returns on Straw Construction Company’s stock were 16 percent, 23 percent, −5 percent, 3 percent, and 15 percent.

.Calculate the variances and the standard deviations for Cherry and Straw. (Do not round intermediate calculations. Enter your variance as a decimal rounded to 5 decimal places. Enter your standard deviat

	Cherry Straw Variance Standard deviation % %

3. A particular stock has a dividend yield of 1.7 percent. Last year, the stock price fell from $84 to $70. What was the return for the year? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

4. The rates of return on Cherry Jalopies, Inc., stock over the last five years were 14 percent, 11 percent, −1 percent, 3 percent, and 14 percent.

What is the geometric return for Cherry Jalopies, Inc.? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

5.A stock has had returns of 23 percent, 13 percent, 2 percent, -12 percent, -10 percent, and 19 percent over the last six years. What are the arithmetic and geometric returns for the stock? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)

6Your grandfather invested $1,000 in a stock 36 years ago. Currently, the value of his account is $318,000. What is his geometric return over this period? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

7You are given the returns for the following three stocks:

Year	Stock A			Stock B			Stock C
1	8	%		4	%		-22	%
2	8			11			35
3	8			7			14
4	8			8			9
5	8			10			4

Calculate the arithmetic return, geometric return, and standard deviation for each stock. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)

8The risk premium is defined as the rate of return on:

Multiple Choice

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• a risky asset minus the risk-free rate.
• the overall market.
• a U.S. Treasury bill.
• a risky asset minus the inflation rate.
• a riskless investment.

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9.The average compound return earned per year over a multi-year period is called the:

Multiple Choice

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• total return
• average capital gains yield
• variance
• arithmetic average return
• geometric average return

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10 An annualized return:

Multiple Choice

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• is less than a holding period return when the holding period is less than one year.
• is expressed as the summation of the capital gains yield and the dividend yield on an investment.
• is expressed as the capital gains yield that would have been realized if an investment had been held for a twelve-month period.
• is computed as (1 + holding period percentage return)^m, where m is the number of holding periods in a year.
• is computed as (1 + holding period percentage return)^m, where m is the number of months in the holding period.

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Answer 1