Question
1. Suppose you earned a 9% total return on a stock for which you paid a price of $42 exactly one year ago. In addition,
1. Suppose you earned a 9% total return on a stock for which you paid a price of $42 exactly one year ago. In addition, of the 9% total return suppose you earned a 7% capital gains yield (which means you were able to sell the stock for $44.94 after holding it for one year). Based on this information, what was the dollar value of the dividend (DIV) you received during the year?
2. What is the percentage rate of return on a portfolio which contains four stocks when the rate of return on each stock was 7.5%, -16%, 22.5% and 14% for Stocks 1 through 4 respectively. Assume you have $25,000 invested in each stock so your portfolio is $100,000. This also means each stock is weighted equally, or w1 = 0.25; w2 = 0.25; w3 = 0.25; and w4= 0.25 in decimal form.
3. What was the one-year real rate of return for an investor who earned a 15% nominal return over the year if the rate of inflation during the same time period was 7%?
4a. What will the following investment accumulate to (i.e., find the future value, (FV)): $350,000 invested today (so PV = $350,000) for 5 years at 8 percent compounded annually?
4b. Now suppose that your $350,000 investment for 5 years grows at an 8 percent annual rate but with quarterly compounding. What will be the FV of this lump sum after 5 years with quarterly compounding?
5a. What is the present value (PV) of the following investment: A bond which will pay you a one- time cash flow of $1,000,000 in 10 years (so FV = $1,000,000) at a 12 percent annual rate with annual compounding?
5b. Using the same $1,000,000 FV cash flow to be received in 10 years, what will be the present value (PV) today if that cash flow is discounted at 12 percent with semi-annual compounding?
6. Assume that IBM has increased their dividends from $7.50 per share in 2017 to $$9.15 in 2021. What is the annual growth rate in dividends per share over this four-year time period.
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