Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

4. Complete the example for calculating realized returns with cash from our meeting. Use both portfolio method and accounting method to verify that they



Finance Homework.png




 

4. Complete the example for calculating realized returns with cash from our meeting. Use both portfolio method and accounting method to verify that they produce the same results. Suppose you have $100,000 and ABC is trading at $20/share. One-year later, ABC pays $2 in dividends and is worth $16/share. a) Suppose you bought 5,000 shares of ABC. b) Suppose you bought 2,500 shares of ABC, and deposit rate is 5%. c) Supposey you bought 10,000 shares of ABC and borrowed at 5%. d) How would the method be affected if the borrowing rate was higher at 6%, but the deposit rate remains unchanged?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

a Portfolio Method 1 Initial Investment Number of shares bought 5000 Cost per share 20 Total initial investment 5000 shares 20share 100000 2 Dividends ... blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Accounting and Reporting a Global Perspective

Authors: Michel Lebas, Herve Stolowy, Yuan Ding

4th edition

978-1408066621, 1408066629, 1408076861, 978-1408076866

More Books

Students also viewed these Banking questions