Question

1. Given the following year end stock closing prices for Long Tech Inc. calculate the annual holding period returns for each year from 2015 to 2018. Please Show all work with formulas!

Year                       Price                      HPR

2018                       $45                         _________

2017                       $41                         _________

2016                       $24                         _________

2015                       $28                         _________

2014                       $20                         _________

                               

b. For the above holding period returns, what is the effective annual return if you purchased the stock in 2014 and sold it in 2018 at the prices listed?

c. What is the average annual HPR, the standard deviations of HPR’s, and the coefficient of variation?

Answer 1

the solution is attached in the excel images, formulas used are:

HPR for year 2018= ( price in year 2018-price in year 2017)/price in year 2017

and similarly HPR for other years can be calculated

effective annual rate = ((price in 2018-price in 2014)/price in 2014))^(1/n) -1

where n = no. of HPRs = 4

average annual HPR = sum of all calculated HPRs/ no. of HPRs

standard deviation = square root of variance

variance = sum of squares of differences of HPRs from average annual HPR

coefficient of variation = standard deviation of HPRs / average annual HPR