Question
1-Calculate the Arithmetic and Geometric growth rate for a company with the following EPS data $.32 $.45 $.55 $.48 $.40 $.90 $.85 $.80 $1.30 $1.60
1-Calculate the Arithmetic and Geometric growth rate for a company with the following EPS data
$.32
$.45
$.55
$.48
$.40
$.90
$.85
$.80
$1.30
$1.60
Show that the Arithmetic mean is incorrect. .
2-Given the following info calculate the personal rate of return for this portfolio for Jan, Feb, and Mar and the first quarter of 1998 using the Modified Dietz Method.
| date | Market value $ | Cash flow $ | MC post cash flow $ |
| 12/31/97 | 200,000 |
|
|
| 1/31/98 | 208,000 |
|
|
| 2/16/98 | 217,000 | 40,000 | 257,000 |
| 2/28/98 | 263,000 |
|
|
| 3/22/98 | 270,000 | -30,000 | 240,000 |
| 3/31/98 | 245,000 |
|
|
12- You are considering the purchase of a 2-year bond (semiannual interest payments) with a coupon rate of 8% and a current price of $964.54. The bond is callable in one year at a premium of 3% over the face (par) value. Assume that interest payments will be reinvested at 9% per year, and that the most recent interest payment occurred immediately before you purchased the bond. Calculate:
a)The Current Yield
b)The Yield to Maturity
c)The Yield to Call
d)The Total (Realized) Return if the bond is called and not called.
13-What is the modified duration of a seven-year par value bond that has a coupon rate of 9%? Use the approach where you have to calculate weights for each cash flow.
14-Calculate the duration of a ten-year level annuity with annual yield of 9%.
Hint: D = (1+y)/y T/((1+y)^T -1)
15-Salmon Fraser Corp. stock has the following probability distribution of expected prices one year from now:
State Probability Price
1 25% $50
2 40% $60
3 35% $70
If you buy Salmon Fraser today for $55 and it will pay a dividend during the year of $4 per share,
what is your expected holding period return on Salmon Fraser stock?
16-Consider the following probability distribution of returns for stocks A and B. Show ALL
calculations, not just answers.
State Probability Return on Stock A Return on Stock B
1 0.10 10% 8%
2 0.20 13% 7%
3 0.20 12% 6%
4 0.30 14% 9%
5 0.20 15% 8%
a. What are the expected rates of return of stocks
b. What are the standard deviations of stocks ?
17- How many stocks are in The Dow Jones Industrial Average and how is it calculated?
18- Computation of Macaulay duration:
a. YTM = 6%
| (1) | (2) | (3) | (4) | (5) |
| Time Until Payment (in years) |
Payment | PV of Payment Disc. at 6% | Weight of each Payment | Column (1) Column (4) |
| 1 | 60 |
|
|
|
| 2 | 60 |
|
|
|
| 3 | 1060 |
|
|
|
| Column Sum |
|
|
|
|
b. YTM = 10%
| (1) | (2) | (3) | (4) | (5) |
| Time Until Payment (in years) |
Payment | PV of Payment Disc. at 10% | Weight of each Payment | Column (1) Column (4) |
| 1 | 60 |
|
|
|
| 2 | 60 |
|
|
|
| 3 | 1060 |
|
|
|
| Column Sum |
|
|
|
|
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