Question

Basic (Questions 1-12) 1. Calculating Returns (LO1) Suppose a stock had an initial price of $79 per share, paid a dividend of $1.45 per share during the year, and had an ending share price of $88. Compute the percentage total return. In Problem 1, what was the dividend yield? The capital gains 2. Calculating Yields (L01) yield? 3. Return Calculations (LO1) Rework Problems 1 and 2 assuming the ending share price is $71. 4. Calculating Returns (L01) Suppose you bought a 7 percent coupon bond one year ago for $970. 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? c. If the inflation rate last year was 3 percent what was your total real rate of return on this investment?

Question 1- 4 are cobsidered one problem. please answer accordingly. Thanks,

Answer 1

problemi Total percentage retum - DLA-Po) xloo # = $1.45 per share P = $88 per share Po = $79 per share 1.45+ ( 88-79) -x100 = 13.23% 79 problem 2 dividend yield: D $1.45 x100 - = 1.84% $79 Capital gain yield = (P. - Polo $88 - $79 98899 $79 – 11.39% problem 3 assuming ending price is $71 Total percentage return = 0 + (P-Po) EX100 Po pors $71 per share D= $1.45 per share R $89pets $71 Por $79 per share.

= $1.45 + ($71-979) *100 $79 -8.29% Total percentoge veturn = -8.297 divident yield = $1.45 10 = 1.84% $79 capital gain yield = Pi-Po 100 Po 100 = $71-679 $79 - 10.13%, - divident yield = 1.84% 4. capital gain yield - 10.13% 4 Total percentage return = - 8. 29% problem u a) buy & bought 7% coupon bond one year ago costing $970 today if isell the bond ; receive $940

face value of the bond is $1000 total dollar return on this investment = interest + money deceive through sale of bond face value & rate of interest - coupon = $1000 x 1% = $70 total dollar return return on this on this investment - $70 + $940 - $1010 case if we are not setting it today Rotal dollar return on this investment = $70 4970 = $10407 be nominal rate of return = euth - Current market value b. nominal rate of return = Current market value - original investment amount original investment amount $940 - 1970 x 100 = 3.09%, $ 970

C. Real rate of retuine nominal interest rate - inflat – 3% = 3.09% 0.09% - nominal interest rate = 3.09% inflation rate = 3% a total dollar return on this investment = $1010 b. nominal rate of return = 3.09% C. real rate of return = 0.09% note: nominal rate of return is always positive.